Categories
Politics & government

[2680] Undemocratic Kuala Lumpur

Life in Kuala Lumpur in the past few weeks has been a constant reminder of our flawed democracy.

If you are in the city, look all around you. You will see banners and posters of political parties almost everywhere. Superficially, the colorful show of political flags is a sign of democracy. Now, look closer at those belonging to Barisan Nasional and especially those with Raja Nong Chik Raja Zainal Abidin on it. Be mindful of their messages.

Those messages celebrate the achievements of Raja Nong Chik as a minister. It highlights what he has done over the past few years, with him heading the Ministry of Federal Territories. It appears like the all too admirable democratic judge-my-record, thank-me politics. He even thanked himself in many of his political banners and posters for stuff he did in the city.

Yet underneath this veneer is acid corroding the pillars of our democratic institution.

The campaign narrative told by BN to the voters in the city makes one think that Raja Nong Chik is the mayor of Kuala Lumpur. This is all the more so in Bangsar where he is contesting in the general election. If those messages are to be believed, it would appear that he was both the mayor of Kuala Lumpur and the Member of Parliament for Lembah Pantai, the parliamentary seat which Bangsar is a part of.

If all those achievements highlighted for electioneering purposes are truly his, then he must have directed the very public resources belonging to the city to do what he did. He takes credit for things that are the normal function of City Hall, like the maintenance of drainage around the city, which is funded by taxpayers’ money.

There is a problem with this if one views it through a democratic lens.

The truth is that Raja Nong Chik is an unelected senator appointed as the minister for the Federal Territories. He is not the elected mayor of Kuala Lumpur and he is not the elected representative for Lembah Pantai.

The 2008 general election saw BN win only one out of 11 Parliamentary seats in Kuala Lumpur. While Parliamentary seats are an inadequate proxy to the will of the majority in the city, it is the best proxy we have got since there is no local election. Based on that proxy, the majority in the city conclusively rejected BN candidates and BN itself then in March 2008.

In spite of that, BN continued to control City Hall through the Ministry of Federal Territories as if they had the moral mandate to do so. With that, the party was the one that determined the development agenda of the city. Or perhaps, more importantly, BN controlled the spending priority of City Hall.

Add in the fact that the actual mayor of the city also is unelected, voters of Kuala Lumpur are quite simply unrepresented in the very authority that governs the affairs of their home. The elected representatives are dependent on the goodwill of City Hall and the ministry to execute the normal functions of an elected representative.

It is Putrajaya with its pretentious grandiose buildings that dictate the affairs of Kuala Lumpur. The city of millions is being governed from a desolate town erected in the middle of nowhere.

That is undemocratic. And that, ladies and gentlemen, is exactly the premise that BN’s campaign messages rest upon.

How long more will the Kuala Lumpur electorates continue to be politically unrepresented in the running of the city?

There is no reason for BN to change the status quo because it is the beneficiary of things as it is. If BN continues to be in the minority in the city, it is in their favor to keep the whole undemocratic structure intact. Even if BN somehow miraculously wins a majority of Kuala Lumpur Parliamentary seats and by proxy, the will of the voters of Kuala Lumpur, the moral authority BN might gain through this democratic process is only a redundant bonus.

That begs a question. If Raja Nong Chik and BN do not require a win to do what he did in the next Parliamentary term, why vote him in at all?

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 24 2013.

Categories
Economics Politics & government

[2679] An Iron Lady to stop populism

Democracy by far is the most respectable way a society can govern itself. That, however, does not mean that democracy has no weaknesses at all. As Winston Churchill is often quoted, “democracy is the worst form of government except all the others that have been tried.”

It is the best that we have after thousands of years of experimentation. Populism is the very essence of democracy. The good thing about that is that it helps ensure the power of the day must always come back to the people if they want to renew their mandate.

Unfortunately, populism is probably the worst feature of democracy as well. That is so because populism can bring about irresponsible policies that can be costly in the future. Everybody loves having a good time but nobody likes to be there for the clean-up.

We saw that in Greece when the government spent everything that it had and more to make its people happy.

The economic populism we saw there is not the only cause of the Greek sovereign debt crisis but it was a major contributor nonetheless. When the debt crisis finally came about and it was time to tighten the belt, the country was up in arms.

And who can forget, in a humiliated and desperate pre-World War II Germany, Adolf Hitler was popular. That populism later brought devastation that no one had seen before.

Greece of recent times and Germany before World War II are extreme examples of populism gone wild. But it is still a cautionary tale for all to bear in mind: there is always cost to populism.

In the late 1970s, Margaret Thatcher was elected as the prime minister of the United Kingdom. She was no friend of populism. She swam against the current ferociously. “The lady’s not for the turning,” as she once said in response to increasing opposition to her policy.

She was adamant in changing the way of doing things to push the UK national economy forward and out of the doldrums. In her mind, there was too much government in the economy and the private sector played too little a role.

The most important thing of all is that she succeeded in revitalising the economy of the UK. She did the job she set out to do even when it cost her job.

Her determination in pursuing her policy shocked her colleagues. Fearing that they might lose the election, they turned around and gave her the boot.

She died earlier this week at the age of 87. The vile comments that followed the news of her death only strengthened the idea that she was not very popular.

At the very least, she was divisive. But whatever one thinks of her, she took her responsibility to heart and she did not flinch. As Malaysians go to the polls, perhaps it is worthwhile to reflect on the resoluteness that Thatcher showed.

This is especially so when both sides of the Malaysian political divide are engaging in populism.

Both are promising to either increase subsidy or cash transfer in hope of winning the general election. To make the matter worse, both sides promise to cut taxes even when their promises if implemented will see government expenditure rising.

The continuing economic populism cannot be good for the health of public finance. Sooner or later when the party is over, somebody will have to pay for that. The path of economic populism is ultimately unsustainable and somebody will need to hit the brakes.

Fortunately, Malaysia is still at the stage where we can hit on the brakes gently. Government finance is still at a respectable level. There is no need for the harsh fiscal austerity in practice in Europe as European economies struggle to grow. But the leeway that Malaysia enjoys cannot be true for too long if economic populism goes on.

The responsible side will be the one which will hit on the brakes gently. The responsible side will be the one that goes out promising a vision that does not depend on promising yet more subsidies and money to voters.

The responsible side will be the one that stands up and reminds all that we cannot go on partying all day, every day.

It is in this respect that Malaysia needs a Thatcher.

One may disagree with the policy Thatcher implemented in the UK in the 1980s but her resoluteness and refusal to succumb to crass populism is something to be admired.

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 Sun on April 11 2013.

Categories
Economics

[2678] How have those CPI-components behaved?

The CPI for March was released yesterday.

Malaysia’s consumer price index grew by approximately 1.6% from a year ago. It is slightly higher than the inflation rate recorded in February, which was at about 1.5% from a year ago.

You can see which components contributed to the higher inflation, as well as the price behavior of all the CPI-components from November 2012 to March 2013 below.

CPI components Malaysia 2013

From the chart, you can guess which categories suffer from price controls and which ones do not: the ones with constant change are those which prices are controlled. The obvious one is the alcohol & tobacco category.

Here is the alcohol & tobacco category:

Alcohol CPI Malaysia

Alcohol and tobacco are subjected to punishing sin tax almost every year. The step-wise inflation rate reflects the controlled nature of the industry. It is so bad that the industry considers that if the government does not mention them during budget time, it is good news.  This happened in 2012 when the government did not increase the sin tax and hence, the prolonged zero inflation rate throughout 2012.

Nothing, really, shows the controlled nature of the category more than month-on-month rate:

20130418CPIAlcoholmomMalaysia

Each spike in the chart above corresponds to the increase of sin tax.

The transport also appears to be controlled. After all, fuel prices are largely controlled and it is reasonable to expect inflation in this category to be stable. It does seem so on this particular scale:

20130418CPITransportmomMalaysia

But it is just a case of bad scaling. After removing the 2008 outlier caused by government’s move to liberalize part of the subsidy regime, you can see the variation clearer:

20130418CPITransportmomcloserMalaysia

Part of the reason for the volatility in the transport category is that while fuel and public transport fee, which is part of the category, is controlled, the category also includes vehicle prices, which are not controlled. Controlled and uncontrolled items are mixed together under one roof.

Moving on, I have always wondered the reason why have clothing and footwear prices been coming down. And it is not a recent phenomenon. It has been going on for years.

CPI-inflation Clothing Malaysia

The same has been going on with communication category but for communication, fierce domestic competition is pretty much the answer. You can see the competition everywhere. For clothing, it is harder to see so.

I would guess it is the magic of globalization since clothing and footwear are tradable goods, especially with China is to the north. But that sounds too simple.

Categories
Economics

[2677] Should we bring development to them?

Europe was uncontested center of the world during the periods leading up to the 20th century. It was the fountainhead of human civilization. Their progress allowed them to become the foremost colonial powers of the world. The British Empire itself was so vast that as the saying goes, the sun never sets on it.

European achievements created significant inequality in the world. It was an inequality between peoples. It was the modern world versus the primitive world. It was the world of steam engines against the bullock carts.

That inequality later introduced one strong justification for European colonialism across the world. It was the white’s man burden: it was the responsibility of the white people to civilize mankind as a whole.

The world has changed since then. Almost all countries belonging to the Western world are now mired in economic turmoil while many countries of formerly colonized peoples are now actively lobbying to become the new center of the world.

But the idea of the colonialist’s burden never truly died long after the age of colonialism. Underneath what appears a racist idea is the assumption that all of us must live in a certain way. All of us must want the convenience of modern life. That convenience ranges from clean running water and stable electricity supply to good education and health services. We must strive for a minimum level of modern standard of living. We want and need development, as the assumption goes.

To put the idea in a less racist connotation, the white’s man burden was really a forced technology transfer that was meant to raise the recipients’ standard of living to one which the givers’ deemed as acceptable. The modern society looks at its primitive counterparts and decides, ”We can improve their welfare if we educate them.”

It is a narrative the group with the significant advantage says to the less well-off one in the style of a father telling his child, ”I know what is best for you.”

The colonial masters are no more but the paternalistic idea of spreading the light, so-to-speak, remains. In modern Malaysia, it comes in the fashion of the center developing the periphery. It is about those in the Klang Valley and other urban areas civilizing those far at the edge of enlightenment.

Development agenda in Malaysia, after all, has mostly been dictated from the seat of power. The many five-year plans over the years are some of the proof on how centrally-driven the Malaysian development process has been.

This is not so much a condemnation of those plans. Clearly many aspects developments require considerable centralization. But that does not negate the paternalism goes along with the developmental dictation.

Consider also the rhetoric surrounding the idea of gratefulness by those in power: all of us should be grateful to the bringer of development. Whether or not the rhetoric is reasonable, it highlights how strong the assumption that we all want and need development is.

But it is hard for the beneficiaries of progress to be grateful when they stand apart from that assumption on development. There are those who do not want development even if it improves their welfare.

Take for instance a hypothetically significantly isolated village in the Malaysian interior far from the smallest of towns. Perhaps a hypothetical Malaysian example does not quite make it. Imagine instead real indigenous communities in the inaccessible interior of Brazil and Papua New Guinea whose lifestyle has not changed by much for over thousands of years.

An earnest development push will see roads snaking into the interior to reach these communities. A tarred road will come. Next, a constant electricity supply. Soon, telephone line and maybe not long after that, the internet if there is no mobile coverage to start with. All of that will bring the community closer to the mainstream modern world and threaten to make the old way of life into something that fits the exhibition requirement of a museum. The mainstream culture can swallow whole most ferociously.

If certain communities refuse progress, should the modern society leave the indigenous society alone? Or should the modern society take up the old white man’s burden as theirs — ours — to carry?

Agreeing to the communities and leaving them largely alone does not seem very humane in the long run. The inequality between the modern society and the isolated communities, which is already big, will widen. That inequality will if it has not yet, disfranchised the communities. They will lose their voice among the noisy and sophisticated modern society. The danger is that when they scream, nobody can hear them.

But to bring in progress to them regardless of their wish is the height of arrogance. It is a very authoritarian idea that outsiders know what is best for those communities and that the outsiders should dictate the course of those communities.

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 Selangor Times on April 12 2013.

Categories
Economics Politics & government

[2676] Investment growth is volatile, a slowdown is not necessarily extraordinary or worrying

Some parts of the economy enjoy stable growth rates in normal times. Consumption and government spending are two of the GDP components which grow in a stable manner, unless there is a recession. As much as ridiculous as it may sound (yeah, that is the libertarian in me speaking out), the government does plan its expenditure and that is one of the reasons for smooth government expenditure growth. The same with consumers and others in the private sector too.

Export and import growth rates are stable too, although it is more volatile that the consumption component.

The same cannot be said with investment. It is a stylized fact in macroeconomics that the investment component of the GDP is wildly volatile. It is by far the most volatile of all GDP components. In one period it could reach for the sky and in the next, it could be six feet underground.

Here is a chart to show exactly how volatile investment is compared to other components of the real GDP of Malaysia:

Malaysia RGPD Component 2006-2012

The volatility of GDP investment component (truly, it is gross fixed capital formation) will be mostly true for other countries as well.

So, anybody who wants to score a political point cannot really score a political point if investment in one period slowed drastically. It is the nature of the series. It is just how the economy works.

I write this because the Penang state government has come under criticism because investment into the state has fallen dramatically.[1] Given the context of volatility and investment, I would not take the criticism too seriously.

Now the investment figures referred to are not strictly the real GDP investment component (the one that is of controversy is the approved investment figures), but the nature of volatility is the same anyway.

Slow investment growth may be a worry but only if there is a significant slowdown in the sense that there is structural break. In other words, something like if the average investment growth from 2005 to 2010 is significantly lower than the average from 2001 to 2005. In contrast, if investment growth in 4Q2012 is significantly lower than in 3Q2012, or even if 2012 as a whole is lower than 2011, I do not think one can say much without further context: from the series itself without further context , an investment growth slowdown or even an outright investment slowdown gives out no real story.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
[1] — GEORGE TOWN: A DIP of 73 per cent in investment flow into Penang has the state Barisan Nasional questioning the state government’s abilities to drive and continue growing the manufacturing and services sectors. Both sectors, state BN committee member Ong Thean Lye said, were the main sources of revenue for the state and had in previous years placed Penang at the top in the country’s investment ranking. However, there were now growing concerns that investments were on the decline with Penang only getting RM2.47 billion in investments last year compared with RM9.11 billion in 2011 and RM12.24 billion in 2010. [Looi Sue-Chern. Harvard’s Gopinath Helps France Beat Euro Straitjacket. New Straits Times. March 22 2013]