Tag: Anwar Ibrahim

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Economics Politics & government

[3022] Fuel subsidies, Pakatan Harapan, spending cuts and political capital exhausted wastefully

When the government in Putrajaya highlighted its policy of warmer air-conditioned office temperature as part of the drive to save energy, Malaysiakini exaggeratedly called it an austerity drive.[1]

It is not at all but several weeks later, the government is carrying out a larger spending adjustment exercise by cutting what the Finance Ministry calls non-critical expenditure across all ministries in order to accommodate for the ballooning fuel subsidy cost, which in turn is created by military conflicts in the Middle East.

I still would not call it austerity for the same reasons I rejected the charge levelled at the 2018-2020 Pakatan Harapan government: at that time, total spending and the economy itself actually grew. For 2026, total government spending and the economy would very likely expand too. It is just not the Malaysian mainstream view to expect a recession and an aggregated government spending cuts in the next 12 months. (Still, it does not help that the Anwar Ibrahim-led government itself uses the language of austerity…)

I find the cuts disagreeable though understandable.

Disagreeable because, for instance, to have RM3 billion worth of non-critical spending within the Ministry of Health that suffers from all kinds of manpower and facility shortage sounds incredible. So outrageous that even the Ministry of Health is contesting the cuts. One would think that if there were indeed that size of non-essential spending, it should be redistributed to essential services within the ministry instead of being redirected towards fuel subsidies that are not just unsustainable financially, but wasteful in terms of opportunity cost at a time when economies are competing at the technological level that could redefine future growth in a big way.

Ideally, what should be cut instead is the fuel subsidy spending, which the latest policy has failed its purpose. The regime was designed to save money but the truth is, it was designed to do minimal work during a time of low petroleum prices.

Just imagine the kind of policy we could run based on the amount used and to be used for fuel subsidies this year alone. We could turbocharge electrification throughout Malaysia and address the energy prices more sustainably. Fortify our health and education system to meet ongoing and future challenges. Build larger and stronger public transport network, which also reduces out dependency on petroleum. Provide very large cash transfer programs, which is a superior form of assistance versus subsidies. We could even pay Sabah and Sarawak large petroleum payments and address the cause of that one episode of national divisions.

Nonetheless, the cuts are understandable from various aspects. The war could end soon, somehow. Trump always chickens out. Alternative source of crude oil could be found soon, a betting man could say.

But the most important of them is the national election, which could happen as early as this year. In fact, some state elections are slated for this year, which shows Anwar Ibrahim is running out of options. Inflation negatively affects voters’ satisfaction with the government of the day. And after the electoral disaster for Pakatan Harapan in Sabah along the general discontent faced by the coalition within its own camp (with Umno sharpening some long knives in the passenger seat), anybody in PH seeking reelection would think twice before committing to an energy price hike.

For Anwar Ibrahim, it is doubly so because he and his allies have spent their political capital on self-serving items that include Azam Baki, the Sabah corruption and corporate scandals. These actions easily wash out actual (though limited) reforms done by the government. Not to mention, PH (and PKR especially) have spent an outrageous amount of time fighting its own base instead of its opponents.

As a result, in the PH tank there is no more political capital to be spent on tough policy for the common good at the non-instant gratification horizon. That is a tragedy for a coalition that ran reformasi as a slogan. PH has always needed to use its political capital for tough decisions. Close at the end of the line, it is plain to see that capital has been misspent on political machination that would never inspire confidence among the public, or fire the imagination of the PH base.

[1] — The government has decided to raise air-conditioning temperatures in all its offices as part of austerity measures and to cut down on energy spending. [Austerity: Govt turns up the heat, raises aircond temps, to relax dress code. Malaysiakini. Zarrah Morden. Zikri Kamarulzaman. April 2 2026]

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Economics Politics & government

[2970] Politics of living costs and the inevitable language of austerity

Extraordinarily, the Economy Minister has been holding press conference for every consumer price index release in the past few months. Extraordinary, because in the past, CPI releases were treated with silence by the government, and from time to time, cited in largely unread government press statements. But the new Minister, Rafizi Ramli, is focused on cost of living issues. He sees CPI statistics as a way to regularly talk about it.

He is not alone in focusing on living costs. Information Minister, Fahmi Fadzil in an interview recently said:

“The people don’t really care about the slogan, they care about the cost of living, prices of goods and internet access. Therefore, it is essential for every minister and ministry to act immediately to resolve issues of concern to the people.” [Fahmi: ‘Govt to solve people’s issues through Malaysia Madani concept’. Bernama. New Straits Times. January 25 2023]

A very, very short history of living costs politics

Component parties of Pakatan Harapan (and previously Pakatan Rakyat) have a long history of stressing on living costs politics. When energy prices were high in the late 2000s, DAP, Pas and PKR were pressing on the cost-of-living buttons furiously, and that played well to popular anger at that time.

Furthermore, the focus on living costs is a way to shift attention away from race and religion, towards more welfare-based issues. That shift is something to be welcomed, definitely.

Regression in policy

But as I have written earlier, while living costs deserve attention, the the politics of living costs is counterproductive in many ways. Such politics is the reason why policy progress Malaysia made in the past 10-15 years with respect to welfare policy has been partially reversed. Specifically, I am referring to the shift from subsidies to cash transfers. Cash transfers in many ways superior to subsidies in terms of welfare enhancing. Therefore, blanket subsidies and cash transfers are meant to be competing policies.

Yet, now, we have both and the government for the past 5 years have taken the two as complementary. The confused policy mix is proving to be expansive. And it does not help that the government is scared of new taxes, and prefer hard-to-implement-but-low/unstable-revenue taxes to easier-and-high/stable-revenue ones, which causes a severe fiscal constraint.

Rafizi, who previously was a strong believer in blanket petrol subsidies, appears to have walked back, perhaps after realizing the state of government finance, He, along with Prime Minister-Finance Minister Anwar Ibrahim, are now talking about targeted subsidies instead, which has been discussed since at least 2019, not long after blanket subsidies were reintroduced. But having both targeted subsidies and cash transfers are still a confused policy mix. The ideal would be to move to cash transfers fully.

Politics of living costs almost always means large subsidies

The politics of living costs is counterproductive because, with its logical framework, the easiest way to address it is through subsidies and price controls. Other ways—wage hikes for one, or competition regulations—are much harder to implement and takes longer to be realized. The thing with subsidies is (in some ways cash transfers too, but at least cash transfers is much, much more efficient in enhancing welfare while it can always be clawed back via taxes if the wrong persons received it), it tends to take resources away from other things, like funding healthcare, investing and maintenance infrastructure or building defense capabilities in a region has been taking peace too much for granted.

You cannot solve these structural long-term things, if politics of living costs that is always in the now, is the ultimate priority.

The language of austerity

Since such politics takes resources away from many things, it sets the tone of belt-tightening: pay cuts, no pay, RM1.5 trillion government debt (and liabilities), etc. When there is so little left for anything else, usually, a lot of people would be scared and pull back what they could, except subsidies.

Anwar Ibrahim, at a forum in Jakarta, quipped that Malaysia was no longer the country of the 1990s in response to a request by an Indonesia luminary for more Malaysian scholarship for Indonesian students.

Rafizi, just this week, said:

“It is like an overweight person. You know your ideal weight and you constantly remind yourself that you are getting worse,” he said at a forum titled ‘Resetting the Malaysian economy’ organised by Parliament.

“The solution is simple. You need to eat less. If you want to eat a lot, you need to run more. Doctors, gyms will tell you that. Most struggle despite the diagnosis.

“That’s where we are as a country. With the current fiscal trajectory, things will get worse. It takes a lot of courage, political will and cohesion with all stakeholders (to carry out changes).”

[Fixing economy like fat person trying to lose weight, says Rafizi. Joel Shasitiran. FMT. January 27 2023]

Fat. Diet. Those are words one typically associates with austerity. We do not have austerity, but using this kind of language, it would impress many that there is one.

And the source of this language, and the wider fiscal problem the government faces is the politics of living costs.

This second Pakatan Harapan government appears to be repeating some of the mistakes of the first Pakatan Harapan government: too much focus on government financial burden that it was accused of running austerity policies, despite the fact, clearly, there was no austerity at play.

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Politics & government

[2965] Anwar Ibrahim and Pakatan Harapan are a means to an end

It has been a long wait. Anwar Ibrahim is finally the Prime Minister of Malaysia.

Many have remarked how he deserves it. Or that he has been cheated out of it before. Or everybody has had their chances and now, it is Anwar’s turn to rule. Or he suffered to get here.

But, I tell myself that it is never about Anwar Ibrahim. Anwar, and Pakatan Harapan for that matter, is a means to an end.

The end is something much bigger than any one of us. The end is a Malaysia where everybody has a place under the sun, living in dignity and as equal, prosperously.

It will not be easy to achieve that, especially when even such a goal is not quite concrete. It is fluffy. It is intangible, at least the non-economic part. In fact, it is clear not everybody will agree—vehemently disagree at that—to the kind of equality envisaged in that kind of Malaysia.

The first step towards that end, is clearly reconciliation between major groups in the country, and some kind of compromise. But that reconciliation cannot be about making everybody happy. There are principles and ground rules to be adhered to. That we are all Malaysians, that we all have dignity that must not be violated. Reconciliation does not mean reconciling everything. Something, like deep fascism, cannot be reconciled with inclusive values.

The meeting ground has to be reasonable.

Ultimately, the core of that inclusive values, to me are (among several others) the end to the means that are Anwar Ibrahim and Pakatan Harapan.

Categories
Politics & government

[2486] Glad Anwar is not guilty

I am one of many that expected Anwar Ibrahim to be found guilty. I expected so not because I believe he is guilty, but just because I distrust the Malaysian justice system. And when the judge ruled in favor of Anwar, I found myself pleasantly surprised. I am glad for the ruling for two reasons.

First, like I have mentioned, I do not believe that the former Deputy Prime Minister is guilty as charged. The whole episode appears ridiculous from the outset. The circumstances of the whole charge are suspect.

This of course opens me up to the charge of cherry picking: when the judgment works unfavorably, the system is accused as biased but when it works favorably, the system is fine. In my defense, I am not a fan of Anwar and I maintain certain distrust of him. That said, I think I can see gross injustice for what it is; this is not so much about Anwar Ibrahim per se.

It is really also about, if a person as influential as him can be treated like that, what about the ordinary man on the streets like me? Besides, we all (still) have a stake in this society. To have a gross injustice goes quietly in the night will spell trouble later if not immediately.

Second, which is probably more important and more concrete is that I really do not want to see another 1998 in terms of political strive. Furthermore, I personally have run out of enthusiasm for large protests and I definitely have issues with large and sustained protests like the ones in Bangkok not too long ago. I do not want to see a Bangkok in Kuala Lumpur.

I am a liberal but there is such a thing as too much protests. I am not contesting the rights of the protestors (as long as they are peaceful, and peaceful in the truest sense of the word and not according to the Peaceful Assembly Bill 2011). The point I am bringing up is that continuous protests introduce protest fatigue. That fatigue can easily take away popularity of a cause. It makes many angry in the most unproductive manner. And I think, politically and strategically, this is an important factor that must not be discounted.

If a large protest had erupted today, it would blow up a conflict within me: between the distaste of large, sustained protests and the need to stand up. But with the ruling, I have escaped that seemingly impossible knot.

Despite all that, this is only a High Court ruling. Possibly, there is some way to go still, if the prosecution is to appeal the judgment today.

Categories
Economics

[2441] No target, no central planning

Milton Friedman once visited Hong Kong in 1963. He met John Cowperthwaite, the financial secretary of Hong Kong, whom was credited for enabling Hong Kong to become Asia’s foremost financial center through his free market policy. Friedman asked him “about the paucity of statistics” in Hong Kong. Cowperthwaite replied, “If I let them compute those statistics, they’ll want to use them for planning.[1]

Statistics has its uses and it does help us understand our society better. It describes phenomena objectively instead of forcing us to rely on conflicting anecdotes that are dependent on point of views. First and foremost, statistics has descriptive power.

But not all individuals believe in only the descriptive power of statistics. Some believe too much in the prescriptive aspect. Statists tend to belong in the latter group. PEMANDU is afflicted with it too, arrogantly trying to manage the economy when the economy itself is organic.

I reject targets placed on something as organic as the economy. While the government does have a role to play, to set a target on the economy mistakes the economy as a business entity or a firm, pretending as if the planner is the CEO, where there is none really.

The dangers of having a set of targets like having specific real GDP growth rate are plenty. One of them is the incentive for the government to spend too much just to meet its target. There is a conflict of interest when the target is set by the very entity that is meant to achieve it (this is also partly the reason why I am skeptical with a lot of KPIs set by the government: incentive to set them low to make themselves good).

This adverse incentive is bad for public finance and ultimately, for taxpayers.

More generally, having those targets encourages central planning.

But this entry is not meant to bash PEMANDU. I think I have criticized PEMANDU so much that I am bored of it already. This entry is meant to criticize Anwar Ibrahim.

Anwar Ibrahim is smart. When he realizes that the Najib administration is targeting possibly an unrealistically high real GDP growth rate given the global economic circumstances, he challenges it and demands accountability from the federal government. He wants a special parliamentary sitting to meet if the federal government fails to meet their target later in the year.[2]

I disagree to the demand for accountability. It is not so much I would like to give the Najib administration a free ride. It is only because I disagree with having a target in the first place. To demand accountability only strengthens the path to the target. That means central planning.

This is a case where accountability is not so hot.

Mohd Hafiz Noor Shams. Some rights reservedMohd Hafiz Noor Shams. Some rights reservedMohd Hafiz Noor Shams. Some rights reserved
[1] — The difference in the economic policies followed by Hong Kong and Britain was a pure accident. The colonial office in Britain happened to send John Cowper-thwaite to Hong Kong to serve as its financial secretary. Cowperthwaite was a Scotsman and very much a disciple of Adam Smith. At the time, while Britain was moving to a socialist and welfare state, Cowperthwaite insisted that Hong Kong practice laissez-faire. He refused to impose any tariffs. He insisted on keeping taxes down.

I first visited Hong Kong in 1955, shortly after the initial inflow of refugees. It was a miserable place for most of its inhabitants. The temporary dwellings that the government had thrown up to house the refugees were one-room cells in a multistory building that was open in the front: one family, one room. The fact that people would accept such miserable living quarters testified to the intensity of their desire to leave Red China.

I met Cowperthwaite in 1963 on my next visit to Hong Kong. I remember asking him about the paucity of statistics. He answered, ”If I let them compute those statistics, they’ll want to use them for planning.’’ How wise! [Milton Friedman. The Hong Kong Experiment. Hoover Digest. July 30 1998]

[2] — KUALA LUMPUR, Oct 10 — Datuk Seri Anwar Ibrahim today demanded Parliament reconvene for a ”special sitting” if Putrajaya fails to meet its ”unreasonable” gross domestic product (GDP) growth forecast.

The opposition leader today poured cold water over Datuk Seri Najib Razak’s Budget 2012 tabled on Friday, claiming the prime minister’s predictions and his administration’s alleged penchant for unbridled spending would likely worsen the country’s deficit.

Anwar also predicted the Najib administration would table a supplementary supply bill by mid-2012, seeking for additional funds just as it did in June this year. [Clara Chooi. Anwar wants special Parliament meet if GDP aim unmet. The Malaysian Insider. October 10 2011]