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Sunday, August 1, 2010

BN Fiddles While Malaysia Burns


Kenny Gan, Malaysia Chronicle

A UN report that Malaysia’s FDI nosedived by 81% in 2009 compared to 2008 should ring alarm bells that our economy is in trouble. This plunge is despite the fact that 2008 was a low year for FDI. Neither is this a one-off occurrence as our FDI has been declining for a decade.

Last year we attracted less FDI than Thailand, Vietnam, Philippines and Indonesia which used to lag behind us. On a brighter note we did better than Myanmar, Cambodia and Laos and we may soon be comparing ourselves with these countries. Even more ominous is that FDI outflow has been greater than FDI inflow since 2006 which is unusual for a developing country. The FDI outflow has all the signs of capital flight and show that even locals are losing confidence in the economy.

Private investments are also down and unsustainable government spending is propping up the economy. Our manufacturing base is shrinking and there is a danger that we may de-industralize with existing multi-national companies moving out. Instead of tackling this serious problem BN is more interested in pointless issues such who can use Allah and Malay unity. Instead of working closely with the PR state governments BN is trying to sabotage them by withholding funds and busy with politicking to discredit and pull them down.

Why are foreigners not interested in Malaysia despite our strategic location, political stability, high literacy rate and English speaking population? What has happened to our competitiveness in attracting foreign investments? The reasons are many and include high corruption, high crime rate, lack of democracy, racial policies, shortage of skilled workers and lack of judicial independence. However I shall focus on the last two which are real deal breakers for foreign investors.

Lack of skilled workers is seriously impairing our ability to transition to a high income knowledge economy. According to Universiti Malaya economist Rajah Rasiah, Malaysia has 300 to 400 science and technology workers for every 100,000 persons as opposed to 3,000 in countries which have made the transition. At the low end we are unable to compete with countries like Vietnam, Indonesia and China in terms of cheap labour but we are unable to move up the value chain due to lack of skilled workers. This is call the middle income trap but bear in mind that middle income may become low income as other countries progress.

This lack of skilled workers is not a new phenomenon, it is the product of decades of a flawed education policy and exacerbated by high migration of skilled human capital. When there is no meritocracy in tertiary education our universities begin to churn out unemployable graduates.

Public university entry is bifurcated into two streams – matriculation which represents a faster and easier path to university for Malays and STMP for non-Malays which takes an extra year after a difficult public exam. Even then, many well performing non-Malay students are denied places in public universities or are unable to earn a place in the course they want. If their parents are financially well-off they can further their studies in private institutions but it leaves a bitterness which is fuel for future migration.

The existence of single race technical schools, colleges and universities reserved for bumiputras has not helped to raise standards. If Malays are aware that they do not need good grades to enter university as there are more than enough places for them what incentive do they have to study hard? The universities’ response to low quality and unmotivated undergraduates is to dumb down academic standards to help them graduate. Meanwhile many bright non-bumiputra students without strong financial means are denied a chance to further their education.

A big pool of high quality graduates is the future of the country. If there are not enough universities the priority is to build more and improve their academic standard, not to buy multi-billion ringgit submarines to defend against non-existent threats. Could it be that the tertiary needs of Malays are met more than 100% so there is no urgency to build more universities?

Even worse, proposals by the Chinese and Indian communities to build their own universities using private funds were stalled and disallowed for decades. Only after the 1999 general election when the non-Malays saved BN did Mahathir allow MCA to build UTAR and MIC to build AIMST; primarily to save these parties from the wrath of their communities more than anything else.

University academic staff and promotion are heavily influenced by race which is another blow to standards. Our universities have long fallen out of the list of 200 best universities in the world and only recently has UM managed to claw back to 180th place. Single race education institutions have no place in the modern world and should be opened up to all races but will BN do it? A proposal by Selangor Mentri Besar Tan Sri Khalid to open up 10% of Mara colleges to non-Malays was met with a furious uproar by Umno.

Racial bigotry in education has cost the country dearly but BN is doing nothing to address the deep-seated problems in education. Compounding this is a critical brain drain problem which is hemorrhaging skilled people overseas. Statistics show that more than 300,000 skilled Malaysians migrate to foreign lands every year and this figure is probably outdated as migration is accelerating.

The government has proposed setting up a Talents Corporation to attract skilled Malaysians back with attractive packages but like the ‘Returning Scientists Program’ and the ‘Brain Gain Program’ is bound to fail. While there are many pull factors in developed countries there are also many push factors here in the unequal treatment and limited opportunities for minority races and the lack of meritocracy in employment and promotion. Making a segment of the population feel second class is not the best way to retain them.

Beside the lack of skilled workers the second big deterrent to foreign investors is the perceived lack of judicial independence. It is a shame that foreign partners usually specify Singapore as the centre of arbitration in case of any disputes. If foreigners do not trust our judiciary they are loath to come in and put their money down for fear that they will be given short strife in future. But nothing is being done to improve the judiciary.

After the Perak power grab debacle which saw the judiciary stepping on the Constitution with illogical and controversial judgements to enforce BN’s power grab the government is pushing ahead with Anwar Ibrahim’s ridiculous sodomy trial. When this odious case is over all dregs of judicial independence will evaporate into thin air if indeed there are still some remnants left.

Malaysia’s economy is in a deep pit caused by racial policies, lack of meritocracy, lack of skilled workers, high migration rate, low university standard, stagnant income, declining foreign investment, endemic corruption, rent seeking practices, high wastage, unfettered unproductive spending on defense, useless mega projects, diminishing natural resources, authoritarian government, compromised democratic institutions, tainted judiciary, useless MACC, spineless controlled media, etc .

The country is being supported by petroleum which is a diminishing resource and the industriousness of its people which is being squandered. No country with such a burden can go up, the only way is down.

Can BN fix the country? If we analyze the problems we will find that racial policies are the root of Malaysia’s problems. But Umno is powerless to change things because as a Malay nationalist party the special treatment of Malays underpins their political power.

Rolling out slick economic plans with lofty targets but no substance behind them does not help. As expected prime minister Najib Razak has watered down the market driven intentions of the NEM and retained the outdated 30% bumiputra equity under pressure from right wing groups like Perkasa. Hence we see that the spirit of the NEP will live in the NEM as it has in the NDP.

All races are in the same boat and if they do not paddle together the country can hardly go forward competitively. Whatever happens to the boat will affect all races.

Only a political change to the multi-racial politics of Pakatan Rakyat can save Malaysia and recovery will be long and slow. Otherwise instead of being a high income country, we are on track to be a maid and manual labour exporting country by 2020 if BN continues to rule.

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