Tag: affirmative action

Categories
Economics Education Society

[2931] If affirmative action is to end in Malaysia, spending on public service has to increase

Discussions on affirmative action in Malaysia have never gone away but interest in it has increased in recent weeks. The first exciting interest in the topic was Hwok-Aun Lee’s book Affirmative Action in Malaysia and South Africa: Preference for Parity. I have not got my hands on the book (I hope to buy it soon), but I listened in to one of Lee’s webinar on the book and the subject earlier this year. Most recently, is Nazir Razak stating the New Economic Policy—Malaysia’s affirmative action—no longer works.

My thinking of affirmative action has softened over the year. Softened in the sense that while in the past I think I could be labeled as anti-NEP, I have adopted a show-me-the-result position. In fact, I have concluded there has to be a balance between economic and social imperatives. As a relevant side note, I am writing a book (a never-ending project) and in a segment of it, I outlined why I thought NEP might have a role in created a shared identity in Malaysia (perhaps Bangsa Malaysia as a shorthand for this) for a short while in the 1990s. It was a decade or two-long process coupled with rapid industrialization and globalization, that was unraveled during the late-1990s Asian Financial Crisis and later, China’s entrance into the global marketplace. My current thinking is that, though NEP-styled affirmative action worked in the 1970s and the 1980s (dare I say the 1990s despite its official expiry?) situation in the 2020s have changed dramatically that the way Malaysia does it affirmative action need to be rethought. It requires a rethinking because NEP did not work in isolation during the years and the factors (high growth and absence of China) that made NEP work are no longer present today.

Last week, I somehow got pulled into a Clubhouse discussion about NEP where Nazir Razak stood on a soapbox. Near the end, riding on an acquittance’s train of thought, if I remember correctly, Malaysia needs to invest in its public services more. I would like to clarify and expand that idea further.

If affirmative action is to end, then I think it is imperative that public service be expanded further. This is not to say the public service expansion and affirmative action are mutually exclusive. But it is probably good to understand that most beneficiaries of affirmative action probably rely on public service more than others. Removing affirmative action would likely require expansion in other parts of government in order to maintain the beneficiaries’ general welfare.

Here, the maintenance of general welfare is importance for social stability, which in turn is crucial to creating the environment for long-term economic growth, which itself is important to the maintenance of welfare. It is a loop.

By public service, I refer specifically to public education and public health system. By expansion, I mean by making it more accessible cheaply at a higher quality and while this may sound fluffy, I think the best proxy to this is government spending in these areas.

And Malaysia lags in terms of public spending in these two areas when compared to other countries. I have written a short advocacy paper on this matter under REFSA earlier and you can access it here.

A brief look at the World Bank database containing data from most countries will show that Malaysia is a middling when it comes to government spending in education relative to its GDP, while under-spends in public health services.

Malaysia’s government spending on education and health relative to nominal GDP

Malaysia’s 2018 government spending on health was 1.9% of GDP and this compares badly with upper-middle income countries’ average of 3.2%.[1] Malaysia does better in public education, spending 4.7% of GDP in 2017, versus upper-middle income average of 4.1% in the same year (year 2017 and 2018 are chosen because those are the latest year available for year-to-year comparison between Malaysia and upper-middle income average).[2]

So, if ever affirmative action, or NEP in whatever form it persists now, is to be dismantled, I feel is it crucial to boost public spending in government services. Boost spending alone, of course, is not enough. How you spend it matters too.

Hafiz Noor Shams. Some rights reserved

[1] — Domestic general government health expenditure (% of GDP). Open Data. World Bank. Accessed April 7 2021.
[2] — Government expenditure on education, total (% of GDP). Open Data. World Bank. Accessed April 7 2021.

Categories
Economics Education

[2547] PTPTN debt a cost of affirmative action

Social mobility is crucial to the maintenance of a healthy liberal society. Inflexibility will have elites entrenched within the state apparatus and eventually becoming de facto dictators themselves, unless there is some sense of altruism among the elites. The monopoly of power itself is illiberal in so many ways.

There are ways to address the concern about social mobility and its illiberalness. The provision of education to the masses is one of them.

Education grants individuals the confidence to overcome haplessness. It provides the tools for individuals to rationalize the world and then encourage them to take fate into their own hands. With a good education, individuals will no longer be dependent on holy men’s words or beg the political elites for benevolence. Individuals will have their minds sharpened to make their own decisions. Education permanently grants individuals the motive for self-initiative for secular improvement and that is the engine of social mobility that will later help in creating a dynamic society that is liberal.

It is in this sense that equal access to education — basic education — is important.

The ability to read, write and count open up the doors of opportunity. Without these basic abilities, individuals will be disenfranchised from society. The disenfranchised will forever begin a race hundreds of steps behind, even before the race begins. They will likely form the underclass. Once one becomes an underclass, without intervention, it will be incredibly hard to break out from it. That calcifies social stratum and makes the journey towards an authoritarian society one step closer.

No self-respecting liberal will want to live a society with calcified social stratum. Permanent political monopoly is harmful to a free society. An intervention is required and justified and that intervention is the provision of mass education. That is the liberal rationale for basic education for all.

There is a limit to that rationale, however. Indeed, the rationale for education at the tertiary level changes. At the upper level, it is less about mass education than it is about meritocracy and specialization.

Not everybody has the aptitude for university education. That is why upper-level education has to be more meritocratic than primary- and secondary-level education. Even if it opened all without any filter, many would fail to make it to the end.

Under a meritocratic setup, those without the necessary aptitude must consider other tertiary options besides university education. The continuous pursuit of university education without the necessary aptitude will prove disastrous because there is heavy cost involved in terms of time and money.

To put it in another way, a meritocracy system will try to prevent a person from embarking on a costly journey that may end in failure anyway. It tries to save both time and money of the person and the society.

If one assesses the rationale for education at the individual level, it is mostly all about finance: one pursues university education with the expectation of earning higher wages in the future than he or she would without the same education.

Even without the explicit financial intention, it is generally true that the financial reward of having a degree is potentially tremendous. According to The Condition of Education 2011 published by the National Center for Education Statistics of the US Department of Education, those with a bachelor’s degree on average earn USD40,000 for the whole year in 2009. Those with high school diploma on average earn only USD25,000 for the year. The number will differ in Malaysia but the wage premium still exists.

The danger is that when one gets stuck in the system and fails to earn the degree. Another danger is that the degree earned does not give graduates a sufficient wage premium; not all degree commands the same wage premium. There are many reasons for that and one of them is quality of the degree.

In both cases, both the dropout and the graduate will learn that the cost of their university education will be too high compared to the returns of a university education. The education becomes less worthwhile.

The Malaysian problem is that there is or was a large-scale affirmative action with respect to university entrance. The proponents of affirmative action effectively and foolishly extended the rationale of mass education that is relevant to primary- and secondary-level education to the tertiary level, while ignoring the very different nature of tertiary education.

As a result, too many were encouraged to attend university and other higher education institutions without sufficient meritocratic consideration. Accommodation was made by rapid and significant expansion of places through the establishment of new education institutions. On the sideline, a state-backed mechanism—the PTPTN—was set up to help students to finance their education cheaply, and indirectly, to support private higher education service providers financially.

With the affirmative action and the disregard for meritocracy, quality eventually suffered. That affected the wage premium of those degrees.

This is probably what is happening to those who are unable to repay back their PTPTN loans. After having gone through university and other equivalent institutions and after having financed the cost through borrowing, they discovered the papers they earned did not command the wage premium necessary to make the education debt not a burden.

This can be linked directly to the issue of PTPTN and education debt. First of all, the financing option provided by PTPTN is cheap and it is effectively a subsidized financing option. On top of that, the cost of education at public universities is also cheap. The deputy prime minister was reported as stating that between 85 per cent and 95 per cent of tuition fees at public universities is borne by the government. The tuition fee itself is heavily subsidized.

Yet, graduates are having trouble repaying those cheap loans. When they are having trouble repaying, then it is likely that they are not earning enough. That in turn implies that their wage premium does not justify their investment in a university education. Further down the line, it suggests that those graduates should not have obtained their university education in the first place, if one assesses the issue strictly from a financial lens.

But they did obtain their university education, thanks to affirmative action. The graduates financed the cost of university by borrowing from PTPTN, an instrument of affirmative action. Now, what they have found is that the very instrument that enabled those graduates to become graduates is the very instrument that debased their papers, making the education debt a burden.

If that is still unclear, then let this be written: the debate about PTPTN debt in Malaysia is really a debate about the cost of affirmative action in the education system.

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 7 2012.

Categories
Economics

[2026] Of a step forward with thousands to go

Liberalization is on the move. Yet, the move hardly deserves to be called a liberalization effort.

Notwithstanding how truly free the local economy is, the federal government led by Barisan Nasional is finally addressing the shortcomings of affirmative action as practiced in the country. The past few weeks have seen the kind of market liberalization that one cannot imagine to be even possible before 2008. The much debated equity ownership quota imposed on public companies is now finished.

It is likely that the BN federal government was forced to address the issue. More than anything else, the Najib administration is a pragmatist concerned with its survival. One cannot be deluded into believing that the administration is doing this out of conviction to the idea of liberty.

Affirmative action was one of several major contentious issues in the 2008 general election. Both its basis and implementation suffered from relentless heavy attacks during the election campaign.

The result of the last general election suggests that the attacks were successful. Those attacks eroded popular support for the policy, even among the groups that it was supposed to benefit.

That and coupled with existing market forces that are always ready to rebel against top-down approaches, liberalization seems inevitable in retrospect. The unpopular centrally planned policy based on ethno-nationalism is now indefensible in a concrete sense. The anti-affirmative action movement has done a remarkably good job at demonstrating why it is indefensible.

As a result, no longer are the weaknesses of the affirmative action an abstraction appreciated by the critical-minded and the well-read individuals only. Many among the masses are convinced that the policy is morally and economically unacceptable. So strong is the anti-affirmative action current that BN cannot support the policy, or at least in its present form, any longer if it is concerned with its chances in the next general election, which must  be held before 2013.

Individuals belonging to the tradition of classical liberalism are generally hostile to the policy. Malaysian affirmative action is a case of government intervention. The policy spreads the tentacles of the government across the landscape to limit essential freedom that individuals and firms require to maximize their welfare. It is one more constraint to adhere to, increasing the cost of doing business.

The quota-based policy worked in the past because other factors outside of Malaysia compensated for its cost. Not too many countries had a good transportation and communication system along with a sufficiently educated workforce previously, especially before the 1990s. Some others like China meanwhile were excessively hostile to the concept of private property despite the fact that right to private property is the non-negotiable basis for a prosperous society. Options for investment in an increasingly globalizing world were limited.

That is no longer true today. Factors that made others unattractive for investment purpose are largely gone. This reduces, if not eliminates, many advantages that Malaysia had over others in the past. With a more competitive environment, the policy of affirmative action stands out as one of several major structural barriers that are handicapping Malaysia vis-à-vis other economies.

For Malaysia to move forward, it is exactly the kind of structural reforms like the recent liberalization on equity that is required.

Classical liberals — libertarians — are savoring this moment after years of living through suffocating government intervention. In times when many governments all around the world are enforcing their influence in the market, it is refreshing to see the government in Malaysia retreating.

Still, one has to be mindful that the recent effort at liberalization is largely confined to restrictions traditionally associated with Bumiputra policy. The government has its hands in too many aspects not just in the market but also in the lives of private citizens.

The recent fiscal stimuli based on government spending are proof that the dream for a free market is still far in the distance.

Even as the 30 per cent Bumiputra quota is liberalized, another quota, albeit less restrictive, is set in place.

In the background, the availability of government-linked companies continues to crowd the market. These entities utilize unfair advantages that no true private businesses can have. These GLCs are monopolies. With excessive market power, it kills entrepreneurship, one of the factors that keep the free market as a system superior to any other.

Meanwhile, prices and supply control regimes are still in place to distort signals in the market in the name of welfare, discouraging the development of an adaptive culture in favor of a static one.

There are other examples that affirm the illiberalness of the Malaysian market.

Hence, there is no time to rest. The pressure for greater freedom has to be applied continually. The Najib administration is one point up but it will have to suffer more criticism.

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 July 3 2009.

Categories
Education Liberty Personal Society

[1783] Of breaking free from a cursed shackle

I experienced a tremendous surge of security today and I have not felt such feeling in such a long time. The only regret I have is that I did not set a higher target for myself. I might have set a goal too low for myself. Ever since graduation a few years ago from Ann Arbor, life has consistently tried to bring me down and the toll it took on my confidence was breaking me. My self-esteem suffered but after a few rallying personal events, I am on my way back up.

I am happy because I am overcoming the shadow of my former self. I am winning against myself.

I have secured my path into the future. That path was in the state of flux previously and I really did not know what I wanted in life. There were too many unknowns to think of, too many factors to consider, too many calculations required. Too many a time, I found myself staring blankly outside to see everything but see nothing.

Now, however, now, the path forward is as clear as daylight and all I need to do now is walk down the lane and never to look back. I have earned a place for a post-graduate work abroad.

If everything goes well for the next few months, I should be out of this country again. The only issue that may pull me back is matter of finance. A back-of-the-envelope suggests I need to raise approximately RM100,000 in the next few months to live comfortably, on top of whatever savings that I have at the moment. Despite the my training, I was surprised of the requirement for additional fund. I had budgeted that I would be able to fund myself through this journey. As it turned out, I have not considered my whole expected expenses in a comprehensive manner. That is my only fear.

Despite concerning regarding the additional money which I need to raise, the fact that I am able to depend on my ability through and through thrills me. It thrills me because this is the chance for me to escape from one criticism which I think is unfair and I extremely deplore.

In A Malaysian Journey, Rehman Rashid writes something to the effect that the Malays are cursed of not knowing whether he had succeed because of his ability or because of affirmative action. My personal experience has taught me the truth of those words. Given my unfriendly position with respect to the flawed affirmative action in Malaysia, my critics have used that very same idea raised by Rehman Rashid against me.

I went to the Malay College and I attended the University of Michigan. While Michigan accepted me based on merit, it is really hard to say if the government scholarship which I received to go to Michigan as well as the somewhat subsidized education which I was obtained at the Malay College was on merit or simply because of the affirmative action. I therefore grappled to answer criticism against my position to the affirmative action.

I cannot live with that. Only the stars know how much I want to silent my critics and a spot in a post-graduate program gives me the chance to do everything on my own, the personal responsibility which I am undertaking, provides everything that I need.  It provides me the hammer for me to use to break free from that curse, once and for all, and more.

I earned my time to bask in the sun and nobody, nobody, can rob me of this. I am now free in one more aspect of my life.

Categories
Economics Politics & government Society

[1595] Of flawed policy, not flawed implementation

While I am happy with a new path made possible by the recent general election, I am slightly disappointed at the way DAP and PKR are dismissing the outmoded New Economic Policy. Prior to the election and the campaigning period, I was impressed at how the two parties leaders were rejecting the NEP at the policy level. During the campaigning period however, there was a subtle change in reasoning. Suddenly, the NEP is being rejected because of its flawed implementation.[1] While obviously annoyed at the change of approach, I kept mum throughout the contest; there is time for a debate and there is time to bite one’s tongue. When there is an enemy in front of oneself and the situation is pressing, one does not conduct a debate with one’s compatriots on how to outmaneuver the enemy. Instead, one pulls his knife out and march forth. But now with the enemy vanquished, the time for the debate has arisen yet again.

The NEP is an outdated policy because it fails to adapt itself to new reality of freer global market. At one time given the landscape of the 1970s, it was a suitable policy but now, it is clear that the NEP is one barrier the Malaysia must overcome to realize a freer market and achieve greater prosperity. Another reason is that there are better policies out there that seek to eradicate of poverty or more realistically, provide social mobility compared to the NEP. The NEP assumes that only the Malays are poor whereas in fact, the Malays are not economically homogeneous and neither are other ethnic groups in this country. In other words, the NEP is a blunt policy. A better policy with the intention of providing social mobility and equality of opportunities are the ones that are conscious of socio-economic indicators — meritocracy.

The NEP is being exploited exactly because it is a blunt policy. With its flawed or outdated assumption that all Malays are economically backward, the well-off Malays are undeservedly receiving aid despite the fact that they can effort to live comfortably without any kind of affirmative action. Due to the way the policy is designed, benefits meant for the poor are now enjoyed by others. This rationale parallels the thinking that fuels the awfully badly designed fuel subsidy policy in Malaysia.

Observe how the flaw is at the policy level and not at the implementation stage. When the policy is flawed, its innate handicap is merely being executed at the implementation stage.

Rejecting the NEP because of its flawed implementation is a flawed thinking. Economist Mahani Zainal Abidin said several days ago something to the effect that if the implementation of the NEP is flawed, then policy should be retained with only its implementation processes modified to make it more effective. She is absolutely right.

If the NEP is to be rejected, its rationale has to be deeper than mere flawed implementation.

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

[1] — Demikian penegasan Menteri Besar Selangor, Tan Sri Abdul Khalid Ibrahim mengenai pendiriannya mengenai pelaksanaan Dasar Ekonomi Baru yang dikatakan akan dihapuskan di bawah pentadbiran DAP di Pulau Pinang.

“Apabila tahun 1990-an, kita dapati DEB telah disalahgunakan yang hanya mementingkan segelintir masyarakat Melayu dan segelintir masyarakat Cina dan India yang mempunyai hubungan dengan Umno,” katanya dalam sidang akhbar yang diadakan di Kediaman Rasmi Menteri Besar, di sini, hari ini. [“DEB disalahguna, diselewengkan” – Tan Sri Khalid. HarakahDaily. March 17 2008]