Hail Yellen.
Some good dozens of issues are holding Malaysia back. Several big ones are legacies originating from days long gone. While we can never truly escape history, I feel it is dragging us down too much. So heavy is the baggage that sometimes, I feel the best way to move forward is to forget.
I write this because Chin Peng died on Malaysia Day. He fought for a very different version of Malaysia, possibly the very opposite of what we have today. That makes the date of his death quite ironic, although it is arguable that his struggle hastened the independence of Malaya and later the formation of Malaysia.
We can never truly know how it would have been if he had his way. But, if offered the choice between a Communist state and today’s Malaysia, I will choose today’s reality—even with its lamentable imperfections—without hesitation.
That does not mean the imperfections afflicting Malaysia today are acceptable. We can live in a society that is better than what we have today. That has to be true because otherwise we must have given up on this country.
One imperfection comes from the very era Chin Peng and his generation represent. The fight against the Communist rebellion took a toll on our way of life. We sacrificed our liberty for security then. Unfortunately years after the conflict ended, we continue to make the same sacrifices when none is needed. Instruments useful for the fight against the Communists have been abused to suppress other Malaysians.
There has been progress, like the abolition of the Internal Security Act, but the opening is happening too slowly for my liking. The promise of more liberalization remains unfulfilled, no thanks to pressure from those still unable or refuse to move on.
I hope the death of Chin Peng — and slowly, his generation regardless the sides they are on — brightens the prospect of us forgetting old fears that are increasingly irrelevant to this age. I use the word irrelevant not to deny old wounds. The wounds are real and I respect that. I write so because when you look all around you, you will not expect a Communist to shoot you. Communism itself does not deserve the attention it receives in Malaysia today.
All the silly political ding-dong on the matter like arguing about the ashes of Chin Peng, gives Communism too much undeserved attention. In fact, the government’s stubborn refusal to let Chin Peng be buried in Malaysia gives Communism too much sympathy.
As that generation slowly fades, my hope is that we can finally take a step forward and leave all the old baggage behind. I hope that the memories of past terrors and the rationale for illiberal laws that we have now will go away with that generation too bitter to move on. I believe only when they are gone will we have a freer hand to write our future.
The era of Communist insurrection is not the only legacy issue bedeviling our modern Malaysia. There is a whole set too long for a comprehensive mention. Some people are blaming the British for Malaysian woes half a century later. What is certain is that these issues are in our collective mind, no thanks to that generation which keeps reminding us of their bitterness and insecurity.
The world changes but they do not. It would be okay if they had kept their old worldviews to themselves as they enjoy their retirement. The problem is that leaders of that generation are still pulling strings.
They are Malaysians too and they deserve a place under the sun but sometimes, they influence too strongly, as Lee Kuan Yew has done in Singapore years after his retirement.
This makes efforts by current leaders, whichever side they are on, to move on more difficult than it should. Former Prime Minister Abdullah Badawi knows what it feels like when Prime Minister Najib Razak comes under unrelenting pressure as the Umno election nears.
But Chin Peng reminds us all that we are mortals. It is just a matter of when.
That generation will be missed. But we need to move on.

Bank Negara held the Overnight Policy Rate at 3.00% yesterday, as widely expected. I tried to explain it fully at Asean Confidential (Sorry, you have to pay for that. I gotta pay for my nasi goreng).
But what if the OPR had purely tracked the Taylor rule?

The drop is due to slower GDP growth and low inflation. I expect both to accelerate later in the year and so, you can see the Taylors rule rate creeping up.
I do not expect the Bank Negara to follow this particular Taylor rule of mine because there are some deficiencies with it. The rule at the moment uses full GDP growth and headline inflation. I want to fine-tune it by replacing the two factors with domestic demand and core inflation respectively instead but… I have been too lazy to do that.
But in any case, for first-pass rough analysis, I think this particular model does help in an actual crisis. Drastic Taylor rule rate movement leading to stabilization at some rate did precede OPR movement.
This chart can be a bit confusing but it essentially shows the contribution of the four GDP components to Malaysia’s overall real GDP growth.

This is exactly the reason why I said it was all government spending previously (okay, all is not exactly accurate. It was a significant contributor, if you like). You can see how the government spending portion suddenly appeared strongly in the second quarter of 2013, while investment and consumption’s contribution shrank. Change in net exports was less bad but in terms of year-on-year contribution, it was less than the change in government spending by a huge margin.
Why did government spending go up?
It was the election as mentioned before (by the way, just to be clear, government spending here is more than federal government spending. Federal government spending was really decent, in contrast of the GDP numbers).
In some ways, the election was a de facto stimulus for the economy. The timing of the election was a fortunate accident. Overall growth would have been far worse without the increase in government expenditure. I calculated that if there were no government expenditure growth at all, the GDP would have expanded by about 2.0% YoY only.
