Tax the Malaysians More

I attended the National Unity Youth Fellowship workshop conducted by one of the leading think-tanks in Malaysia, IDEAS Malaysia during the last weekend, which focused on socio-economic and national unity in Malaysia. The founder of the think-tank, Mr Wan Saiful presented his views on free-market economy or economic liberalism as preached by the demi-god Adam Smith. He also questioned the need to be afraid of the rich and advocated for reduction of taxes in Malaysia.

Whilst it was a good presentation, nevertheless I choose to differ in opinion. Should we be afraid of the rich and reduce the taxes?

No, to both questions. The rich or even the super-rich are “capital accumulators”, which means they play significant roles in providing economic opportunities to the masses or as in Karl Marx's term, the proletariat. While the government can also partake in domestic investments to spur the economic growth, it is unsustainable as the monies in the public purse may be exhausted in the long run as the monetary resource should also be used to fund infrastructure developments and domestic welfare programmes.

Not only that, to have the government as the only economic engine would mean more revenue generation. Knowing that revenue from commodities, namely natural resources are not sustainable and bound to deplete, the only way is to impose taxes on all, regardless of their economic status. But, astronomical increment of taxes will only hurt the people or ironically, cause less tax-revenue generation as presented by the Laffer's curve of taxation. Apart from all these, government's intense participation in business sphere will also crowd out private investment and “de-motivate” the private sector from engaging in economic investments.

Having said that, private sector is very vital in the economic well-being and here is where the capital accumulators or the rich play their role. So basically, there is no need to be afraid of the rich or their accumulated wealth. However, it does not necessarily mean that the rich should be taxed less. In fact, the rich should be taxed even higher compared to now and in different forms.

As I mentioned above, the rich are the capital accumulators. But they also have a different form of existence in the economy. The rich are the “wealth hoarders”. Reading into Thomas Picketty, a French economist's argument in his magnum opus, Capital in the Twenty-First Century, it is deduced that “rate of return on capital is higher than the rate of return on economic growth”. This effectively means, the return from economic activities enjoyed by the rich is higher than the return by other participants in in the economy i.e. the working class.

 While the return from the capital investment by the rich may be re-invested and further spur more economic activities, a significant portion of this “new-found wealth” is hoarded in the form of savings (not to mention “parking” the money in sealed Swiss banks), real estates, equities, etc. These form of assets can be considered as “unproductive” and have little multiplier effects on the economic growth. Anyone with an academic background in economics can surely recall the first “mantra” thought in class, which is “resources are scarce”. It is true, and this applies to financial resources. When the rich “hoards” the financial resources in these form of unproductive assets which are incapable of creating more jobs and opportunities, it causes reduction in resources for further economic activities to take place.

For example, Mr GK is a super-rich industrialist. For the fiscal year of 2014, he made an extra wealth of RM1, 000,000,000. But since he choose to “park” his money in Swiss bank accounts and to buy four more bungalows, he is left with RM1,000,000 in hand and this is the portion of wealth that he re-invests. This is how vast financial resources are hoarded by the rich and contributes to the reduction of “productive” assets that generates the economy.

This situation is worrying as it presents more negative implications that we can imagine to the economy. Inequality is a major problem arising from this scenario. Going by the official records in 2009, 2012 and 2014, inequality in Malaysia as measured by the Gini coefficient is going down. The Gini coefficient is a measure to show the inequality of wealth between the rich and the poor. A zero coefficient shows an equal distribution of wealth in an economy while the extreme end, which is 1 shows the most unequal distribution of wealth. Malaysia's records are 0.44, 0.43 and 0.42 in 2009, 2012 and 2014 respectively. Although it shows a declining trend, the coefficients show us an unequal distribution of wealth and that wealth is concentrated in the hands of some. As a contrast, Norway which imposes high taxation rates, stands at 0.25.

So, the question is, how do we solve this?

Increase Taxes and Introduce More Types of Taxes

These solutions may not invite the acceptance of many at the first sight. Ordinary working class Malaysians will absolutely be fumed over such “ridiculous suggestions”. These suggestions are not to be imposed on the low income and the middle income earners, but rather, on the rich group of Malaysians.

Many people around the world have always seen taxation only as a tool to raise national revenue. But apart from that, taxes can also redistribute the wealth of a society. Official records from Department of Statistics show that Malaysian workers' wage share of GDP (or economy size) in 2013 stood at 33.6%. However, the employers' share of GDP is at 64.2% and merely, 2.2% was collected as taxes.

In contrast, in 1971, wages to GDP stood at 33.8%. 51.7% was employers’ share whilst taxes comprised a higher share of 14.5% of GDP. To note, a higher proportion of return on GDP is retained by the employers now compared to in 1971, due to the low rate taxes imposed in recent times. However, I would not say that society was more equal in wealth distribution in 1971 as the Gini coefficient was 0.513 then. So what went wrong? The problem lies in weak social safety net of Malaysia in 1971.

My argument is, high taxes should be imposed on the rich and the proceeds from the taxes should be channelled to the poor in the form of social welfare programmes, targeted subsidies and cash transfers (although the current form of cash transfer, BR1M is not recommended). World Bank in 2014 mentioned that Malaysia's Gini coefficient – although reported as 0.43 in 2013, after taxes and transfers, it remains at 0.41. For OECD countries, the inequality index after taxes and transfers is 0.32, 0.14 points less than the initial coefficient of 0.46.

This is the impact created when high taxes on the rich are channelled to the poor through strong social safety net programme. This is where Malaysia needs to emphasise on. However, having said that, I do not advocate on raising the corporate taxes as Malaysia's highest rate of corporate tax is already one of the highest in the region. Low corporate tax is needed to entice multinational companies to invest in production capacities within Malaysia. Low corporate taxes also prevent home-grown companies to flee the country to invest abroad, and thus weakening our domestic direct investment.

To substantiate this argument, it is worth noting that Singapore's highest corporate tax is at 17%, Thailand at 20% while Malaysia's at 24%. Indonesia recently has indicated to reduce its tax from 25% to 17.5%. Hence, to remain competitive, Malaysia also needs to reduce its corporate taxes and present itself as an investors' haven.

To be fair to the Najib administration, it has done a good job in introducing GST (despite certain flaws and silly remarks from ministers) and in restructuring the income taxes. Compared to the previous years where above RM3,000 incomes are taxed, from 2015 onwards, only those earning above RM5,000 will be taxed. Highest tax income bracket has also been increased from RM100,000 to RM400,000 to focus more on the rich. However, the highest tax rate is reduced from 26% to 25%. I personally do not see this as a good development.

What Type of New Taxes?

The Malaysian government should introduce Capital Gains Tax (on equity transactions), inheritance tax on inheritance of huge sum of estates from one individual to another and Malaysian version of under-occupancy penalty (Bedroom Tax) on the rich who owns huge residentials despite having small families.

Apart from that, Malaysia should also introduce a flat-rate tax on Malaysians living abroad but hold Malaysian citizenship. Currently, Malaysia's income taxes are imposed on income earned within Malaysian borders, regardless of the individual's citizenship. Income earned abroad is not taxed. Malaysians living abroad should be taxed at a minimum flat-rate as an obligation to the citizenship and for the nation's well-being. But of course, these Malaysians should be appreciated and allowed to vote in the general elections without the need of returning home, unlike the current scenario.

Taxes are not bad, but should be imposed on the individuals with the capacity to pay. Taxes on everyone, regardless of rich or poor, can be devil's toy. But again, high taxes coupled with imprudent spending by the Government, only destroys the society.

Malaysia needs strong trade and workers’ unions

The concern over trade or workers’ union in Malaysia has never been remarkable. Having repressive laws that inhibited the influence of trade unions even since colonial era, Malaysians paid less attention to the role of trade unions in a society’s welfare. Moreover, with Hudud and GST clogging up the public sphere, probably less Malaysians takes concern over the relevance of trade unions.

Trade unions are instrumental in creating and strengthening collective bargaining power between the employees and employers. A good relationship between a strong trade union and the employer helps the workers to enjoy more benefits and see better pay commensurate with increased productivity. Strong trade unions are pertinent in making sure the rights of the workers are not violated by the employers, besides being a medium to boost labour productivity.

Historically, the colonial master, the British Empire was never fond of workers’ union. The British introduce the Societies Ordinance as far back as 1889 to prohibit the growing influence of the working class, apart from the nationalist fighters. The Communist forces, which has been painted negatively in Malaysian history played vital role in the growth of trade unions of Malaya back then.

The Malayan Communist Party led the Open Front comprising of other political parties and organisations in the aftermath of recapture of Malaya by the British forces after the downfall of Japanese occupation. In this front, the General Labour Union (GLU) played a crucial role in fighting for the Malayan independence. This GLU was later divided into two; one in-charge of Singapore’s labour union whilst the Malaya’s was taken care by the Pan-Malayan Federation of Trade Union (PMFTU). The Communist force also played a role in controlling the PMFTU and advocating against liberation of Malaya.

Looking at the possible damage that can be caused by such labour unions in many issues and particularly opposing the Federation of Malaya 1948 proposal, the British oppressors enforced registration of all trade unions. Government servants were prohibited from joining unions of non-government employees. This is in pursuit of a divide in unity of the domestic workforce. Further actions were taken to mandate registration of trade unions in which trade unions’ membership can only be opened workers’ in similar occupation and industries. This rendered PMFTU as illegal and further weakened trade unions’ activities in Malaya.

A comprehensive analysis of current legislations pertaining to Malaysia’s labour law show that such provisions introduced by the British exist till today.

Malaysia’s legislations on employment and industrial relations comprises of the Trade Union Act, Industrial Relations Act and the Employment Act. There are many existing provisions that weaken the influence of trade unions. For example, trade unions can only be regional and not national which means that a trade union can be formed to cover Peninsular Malaysia or Sabah or Sarawak, but a single trade union cannot include all three. Besides, workers’ unions used to be not permissible in industries conferred with “pioneer” status under Section 15 of Industrial Relations Act, but has since been annulled after amendment in 2007. To note, whilst trade unions can be formed within the electrical sector, in electronics sector, trade unions were limited to “in-house establishment”, which means trade union within a company and not inclusive of employees of the company’s subsidiary workers. This rule was only relaxed in 2009 when the Cabinet allowed regional trade unions for the electronics sector.

Thus, the status quo is establishment of four regional trade unions in Peninsular Malaysia; Western, Eastern, Northern and Southern. However, the rule is not fully liberalised since the Electronic Industry Employees Union covers only workers in Peninsular Malaysia, not including workers of East Malaysia. As aforementioned, apart from not allowing civil servants to join trade unions with non-civil servants, only workers from similar occupation can form a trade union. This essentially means, while lorry drivers can form a trade union, it cannot include teachers and bankers.

Effects of Poor Labour Law

Such rules and provisions fragment the workforce and weaken collective bargaining power. This opens the way for the “capitalists” to ill-treat the workers and not paying sufficient wages. This explains why there are claims regarding employers not adhering to the minimum wage rule and mistreating the employees. A study by Verite (a global NGO) and funded by the United States Department of Labour, found evidences about abuse of workers' rights in Malaysia's RM241 billion electronics industry.

Malaysia’s 1^st Human Development Report specifically touches on effects of weak workers’ union in Malaysia. Share of wages to national income has actually decreased from 33.8% in 1970 to 32.9% in 2012. But in contrast to this, corporate profits has increased from about half of the national income to nearly two-thirds during the same period. Malaysia’s share of wages is low in comparison to other countries; South Korea’s share is 50.6%, Singapore’s 42.3% and the United Kingdom’s 62.6%. It is also added that trade union density has dropped by about 40% since 1982 and currently only eight per cent of Malaysian workers belong to a union. This is despite growing number of union members and trade unions in Malaysia.

In the past, workers’ who tried to fight for the rights of the other workers have been suspended and even fired. For instance, Keretapi Tanah Melayu Berhad (KTMB) took serious actions (sacking, issuance of show-cause letter) over many employees after nearly 700 Railwaymen’s Union of Malaysia (RUM) picketed against the mismanagement of KTMB. They also voiced for the resignation of KTMB’s President, Datuk Kadir Elias. Although the affected workers were re-instated, they were required to sign a memorandum which included reduction of salaries, according to the President of RUM, Abdul Razak Md Hassan who refused to sign.

Apart from that, President of the National Union of Flight Attendants Malaysia (NUFAM), Ismail Nasaruddin was terminated by Malaysian Airlines Systems Berhad (MAS) for issuance of media statement urging MAS CEO Ahmad Jauhari Yahya (now former CEO) to resign. It was mentioned by NUFAM that the CEO has failed to take care of the workers’ plight since his appointment. The list goes on and on about such actions by employers that weaken and inhibit the activities of the trade unions.

Conclusion

Malaysia’s productivity level, despite being lower than many developed nations such as Japan and Singapore, is actually growing ahead of other emerging economies. Data from the Malaysia’s Productivity Report 2013/2014 shows that productivity between 2009 and 2013 has increased by 11.7%. But, the bigger question is, has the salary increased as much too?

To recall, minimum wage policy was introduced after it was noticed that salary increment fell behind productivity growth. Few years ago, a World Bank report noted that in the past decade, Malaysia’s productivity growth was 6.7% whilst the salary increment was merely 2.6%. Such scenario may re-emerge, and thus strong trade unions (especially a national-level trade union comprising of all workers) can work towards helping the workers get compensation that they deserve.

For that, Malaysia needs strong amendments to the existing laws with the workers’ welfare in mind, while at the same time, is fair to the employers. However, recent announcement by Deputy Human Resource Ministers, Datuk Seri Ismail Abdul Mutalib that the government will propose amendments to the Trade Unions Act 1959 to ensure it will be in tandem to the TPP trade agreement, creates more questions. First, is the TPP sure to be ratified? Second, will the workers’ right be trampled in order to satisfy foreign multi-national corporations (MNCs)?

Malaysians need to voice out for stronger trade unions; for your own benefit.

Islam; Why is it growing?

The recent shooting spree in France might trigger the rise of Islamophobia not only in Europe which is seeing high spike of Muslim immigration, but also in the entire world. Recent incidents such as arson attacks in few mosques in Sweden are fuelling unwarranted anticipation of Islamophobia. However, there are chances where the carnage in France will create more sympathisers and support for the ordinary Muslims, as seen in Australia recently after the lone gunman siege.

Islam has become one of the major issues to be discussed in Europe in recent days. Some reasons are attributed to the escalation of tension caused by Islamic State and its affiliates worldwide, returning mujahideens from the IS conflict back to Europe and growing anti-immigration scepticism over increasing number of Muslim population (albeit not forming majority) in many European countries.

Muslims' population in the world has increased robustly and as noted by many sources,it is the fastest growing religion in the world in percentage terms. Islam is now only second to Christianity in population share, and there are predictions that Islam might overgrew Christianity in a matter of few decades, although not anytime soon. What causes Islam to grow at such fast pace?

-Muslim population is vastly concentrated in third-world countries where population check is weak (birth rate is high). Low education level in many Muslim countries especially within conflict-stricken states has helped to increase the population. This is in contrast with the scenario in the Western nations where birth rate is low and the population is ageing.

-Restriction on freedom of religion in many Islamic states and members of the Muslim world (read: OIC) has “helped” to contain the possible conversions of Muslims into other religions. In certain Islamic states, apostasy is punishable by death. In some others, like Malaysia, Muslims are prohibited from conversions and members of other faiths are not allowed to proselytise Muslims. Such practices have maintained the population volume. Such restrictions are not applied in other countries, thus causing fluctuations in the number of faithful of other religions. It is notable that atheism is on the rise as many individuals in modern times reject religious doctrines.

-Muslims’ population in Europe is growing as more immigration of Muslims (educated and non-educated alike) into the region from is notable. This has drawn the ire of many anti-immigration parties in Europe although this is a sense of fear not only targeted to the Muslims alone,but also to other non-Europeans as well. Such increase in population can be attributed to instability in the conflict-stricken countries in Near East with huge scores of refugees and asylum seekers seeking “shelter” in Europe. Other than that, many others are arriving in Europe and the United States in search of greener pastures, which many Near East countries could not promise.

-Like it or not, Islamophobia has done both good and bad for the faith of Islam.In the aftermath of the devastating 9/11 incident, Muslims in the United States and also in other Western nations have seen backlash in the form of harassment and discrimination. However, such incidents have also created sympathisers for innocent common Muslims and this in turn has paved the way for many non-Muslims to get to know Islam in detail. This could also help in conversions into Islam as well.

-Strong devotion to Islam as shown by many Muslim faithful might have also helped in recent conversions of non-Muslims. Lack of understanding and poor belief in one’s religion may cause the individual to lose faith in his or her religion. And in the process of finding peace and soul-searching, he or she might be attracted to the practice of Muslims.

-As the number of youths in the Muslim world is high according to a Pew Research report, the religion will see a significant increase in more members. However, with the Middle East struggling in conflicts and sectarian war, poor healthcare and high death rate may also cause the growth to be less “encouraging”.

To summarize, while the common notion is that Islam will grow, researches have shown that other religions together with atheism shall also increase. Christianity, according to the Pew Research, will also be able to retain its position as the world’s biggest religion longer than expected.

Malaysians are fooled; Economically

In the recent UMNO General Assembly, Tan Sri Muhyidin Yassin proposed a new National Economy Policy (not to be confused with New Economy Policy 1970) to catalyse the realisation of the success of the Bumiputera Agenda. In his speech, he stressed that the Bumiputeras are still left out in getting a bigger share of the economy. As a remedy, he spoke about the dire need of this new policy to achieve the Bumiputera Agenda. He, however, missed the entire point or perhaps, did so deliberately.

The policy that he suggests seems to have the same,old aspirations of the NEP of 1970. NEP was crafted after the 1969 racial riot with two prongs; alleviate poverty and redistribute wealth among the diverse races of Malaysia. Whilst poverty reduction has seen the success desired although the figures could be disputed, wealth re-distribution is never so. Under NEP, the Bumiputeras were expected to hold 30% of the corporate equity by 1990 as it was only at 1.9% in 1970. The sad news is, to date, this 30% benchmark is yet to be achieved. However, non-governmental researches have indicated that this 30% corporate equity share have long been achieved; it is only understated by the BN government through its disputable methodology. Examples of questionable way of calculating the corporate equity holding include the use of par value instead of the commonly acceptable market value to quantify market capitalization and the refusal of the government to divide the government’s equity in corporate companies according to the proportion of the racial composition in Malaysia. The latter is important as the Malaysian government owns huge shares in the top companies in Malaysia in terms of market capitalisation.

Currently, the Bumiputeras’ corporate equity stands at approximately 24%. But even if the status quo is 30%, it does not necessarily means that the Bumiputeras are better off compared to other races in Malaysia. Why is it so?

Bumiputeras real economic condition

In terms of Gini coefficient which measures income inequality, the Bumiputera group has inequality of 0.421 in 2012. A Gini coefficient of 0 shows income inequality spread equally in a community, with 1 showing an unequal distribution of income. While in 2012, the Gini coefficient of the Bumiputeras were the lowest in comparison to the Malaysian Chinese’s and Indians’, in 2009, the Bumiputeras had the highest. Not only that, merely 1.3% of eligible Bumiputeras hold 75% of the shares of Amanah Saham Bumiputera and the vast majority own around RM500 worth shares, according to a research by KS Jomo, a famous Malaysian economist. Besides that, within the Amanah Saham Bumiputera (ASB) which is the largest unit trust fund in Malaysia and serves only for the Bumiputeras (hence the name), the Gini inequality is 0.836 and this shows that the 83.6% of the invested amount of ASB is concentrated in the hands of few.

Taking a bigger macroeconomic picture, the bottom 40% of the Malaysian population’s monthly mean household income is merely RM1,847. In contrast, the top 20% has monthly mean household income of RM12,159. This is the state of Malaysia’s inequality. If we focus on the Bumiputera group, 75.5% of them are located within this bottom 40%. In the Malaysian workforce, 64.3% Bumiputera have only SPM qualification.

It is mind boggling that after all the efforts taken to improve the economic conditions of the Bumiputeras, the inequality within the community has remained the same, if not worsen. This is where the BN government has gone wrong.

New Economic Model; same old mantra

Now, that Najib Razak has gone back on his promise to repeal the Sedition Act, it is worth to note that this is not the first time he had done so. When the New Economic Model (NEM) was introduced in March 2010, only Part 1 was tabled in the august Parliament and Part 2 is to be introduced together with the 10^th Malaysia Plan. NEM is supposed to be the country’s long-run framework for economic and social development from 2011 till 2020. NEM was promised to re-create Malaysian public policy on the basis of meritocracy and no longer race-based. Whilst this created overwhelming response from all fraternities, the introduction of NEM’s Part 2 brought back only disappointments.

The Part 2 was not released together with the 10^th Malaysia Plan, instead only on December 2010. Interestingly, merely 10 days before 10^th Malaysia Plan and Part 2 of NEM were supposed to be revealed, at the Malay Consultative Council Congress, Perkasa head, the Malay supremacist, Ibrahim Ali has said that the “Malays have rejected the NEM”. And in the 10^th Malaysia Plan, key race-based policies were retained and as expected, in the Part 2 of NEM, race-based policies in support of the Bumiputeras were mentioned and highlighted. This is clear showing of lack of political will and Mr. Najib dancing to the tunes of Malay supremacists.

Malaysians are fooled

Malays have been constantly fed with the idea that the non-Malays, in particular the Malaysian Chinese, have been stealing “their” economy. This story has been around since even before the 1969 incident until now. But, the bare fact is, before the introduction of NEP, the economy was “stolen” from the Malays by the foreigners who own vast Malaysian wealth and corporate shares. And now after NEP, it is the Malays whom “stole” the economy from the other Malays. Confused? The figures aforementioned are the proofs. Policies under the NEP have created a new layer of Malay elites that controls the Malays’ wealth. While individuals like Mirzan Mahathir, Mokhzani Mahathir, Syed Mokhtar al-Bukhari are feverishly increasing the wealth annually, the ordinary Abu, Ali and Ahmad are still in deplorable economic conditions.

It is true that race-based policies will only create an elite line within a society and will never reach effectives. In Thomas Sowell’s “Affirmative Action Around the World: An Empirical Study” which focuses on Nigeria, Malaysia, Sri Lanka, India and the US, it is deduced that

·         Affirmative actions encourage non-preferred groups to re-designate themselves as members of preferred groups to take advantage of group preference policies;

·         They tend to benefit primarily the most fortunate among the preferred group (e.g. Black millionaires), often to the detriment of the least fortunate among the non-preferred groups (e.g., poor Whites);

·         They reduce the incentives of both the preferred and non-preferred to perform at their best — the former because doing so is unnecessary and the latter because it can prove futile — thereby resulting in net losses for society as a whole.

All three scenarios are evident in Malaysia through the implementation of race-based policies. Many individuals want to be recognised as Bumiputeras such as certain Indian-Muslim groups, wanting them to be labelled as Bumiputeras to enjoy the policies helping the Bumiputeras. The second scenario is, only small fractions of Bumiputera individuals are receiving the positive impacts of NEP and they form the elite group of Bumiputeras. And lastly, race-based policies have restricted non-Bumis growth, both socially and economically (Industrial Coordination Act 1975 required firms with annual turnover of RM2.5 million and 75 workers to allocate 30% ownership to Bumiputeras, scholarships preference for the Bumis, etc). This has also created negative impacts within the Bumiputera community as many individuals have resorted to become “Ali-Babas” to earn instant profit. Race-based affirmative actions have created rent-seeking Bumiputera community, Tun Abdullah Badawi has even stated that 85.37% of projects dished out to the Bumiputeras end up being sub-contracted to non-Bumis.

 It is said that after dismantling the Apartheid Law in South Africa and the enfranchisement of the blacks, late Nelson Mandela introduced race-based affirmative actions to empower the blacks by emulating Malaysia’s model. While this sounds positive, it is most disheartening to see most blacks are struggling from economic inequality. A group of black elites have formed within the larger society and is reaping the most benefits from the affirmative actions, while the poorer sections are left unattended.

Orang Asli

Tracing back to the early history of Malaya, the indigenous groups of the Peninsular are the earliest settlers of Malaya. Currently, there are 18 ethnic groups within the Orang Asli’s larger grouping, with three main classifications; Senoi, Negrito and Proto-Malay. These indigenous people are not recognised in the Federal Constitution to receive the special positions as per Article 153, albeit the fact that they are the rightfully indigenous human beings in Malaya.

As Malaysia’s economic policies are skewed towards the empowerment of Bumiputeras (read: Malays), the Orang Asli groups are severely left out. The fact is, despite the government proudly claiming that abject poverty has been reduced to 0.2%, 50% of the Orang Asli households or half of the 30,000 households is living under the poverty line. While it is true that some members of Orang Asli have become important figures of the Malaysian community, the truth remains that most of them are still living under deplorable means.

Malaysian Indians

The Malaysian Indians are also left out in Malaysia’s economic planning, despite several attempts to “help” this community. The major drawback of this community is, they are clumped together with the Malaysian Chinese in the form of non-Bumiputeras. Thus, very often than not, Malaysian Indians are seen well off than the Bumiputeras or precisely, the Malays.

Even before NEP was formulated, Malaysian Indians’ equity share was only 0.9% when the Malays’ was 1.9%. At that moment, the Malaysian Indians’ share in professional and management group was merely 4.3% whereas the Malays are at 12%. Similarly, the percentage of lndians in the technical and supervisory category was only 6.1 percent compared to 20 percent of Malays. Taking a second look, it seems like the Malaysian Indians needed affirmative actions more than the Malays. Fewer actions have been taken to increase their corporate equity share.

MIC’s first economic seminar in 1974 projected for ambitious 10% share of corporate equity by 1990. By 1980, this was again revised to 6%. But, MIC’s plans and projections for the community were never listened by the UMNO-led government. Now, after 44 years of NEP introduction, the Malaysian Indians’ corporate equity stands at dismal 1.6%. Not only that, their Gini coefficient in 2012 has increased to 0.443 compared to 0.424 in 2009. Now, that’s an achievement.

Malaysian Chinese

It is a pity that this community has always been viewed with negative perceptions. They are often labelled pejoratively as capitalists and controllers of the domestic economy. However, government regulations that were introduced under the pretext of helping the Bumiputeras, have restricted their capacity to grow economically and socially. This has indeed been proven by many studies.

Special Positions

Malay supremacists have often claimed that their special rights cannot be questioned by any other non-Malays. But the very fact shows us that as enshrined in Article 153, it is not “rights” but rather, “special positions”. In the deliberation process of drafting our Federal Constitution, it was earlier suggested that these special positions are to be reviewed after 15 years of independence. However, with the recommendations from Tun Dr.Ismail in the Tripartite Working Group, this 15 years requirement was removed, however, it is accepted that the special positions will be removed once the Malays are capable “to stand by themselves without crutches”. Tun Dr Ismail has noted this in his writings that the special positions are not meant to be forever.

Conclusion

Malaysia has to move away from race-based economic policies to put ourselves on the right track and compete internationally. The government needs to help individuals without preference to race and importance should be given to meritocracy. Remember, race-based policies do not only affect the non-Bumis, but also the intended group, Bumiputeras themselves. It’s now or never.

Mr.Najib, Is My Money Well Spent?

The Budget 2015 announced by Dato' Seri Najib recently, has received mixed reactions from the Malaysians. In fact, the recent budget also received criticism from the Malaysian economic experts such as Tan Sri Ramon Navaratnam. The most important question is, whether the budget is really people-friendly?

The 2015 Budget amounts to RM273.94 billion, an increase of RM9.74 billion compared to the previous year. And as in previous years, emolument or the civil servants' salaries, is the largest component of the budget in 2015 in which next year, the emolument is estimated at RM65.6 billion. This is a big increment, especially when compared to the year 2013 which only reached RM61 billion.

Does the increase in emoluments relevant, when in reality, the government is actively trying to control the government deficit?

Eliminate the post of the Special Envoy

If anyone asks me about a field that promises money for life, I will definitely recommend the person to join politics (related to the ruling party). Within last few years, Dato' Seri Najib has introduced the positions of "special envoy". Datuk Seri Samy Velu (former MIC president and “famed” for his eloquence in Malay language) has been made Special Envoy to South India for infrastructure. Datuk Seri Ong Ka Ting (former MCA president) as the Special Envoy to China and Datuk Seri Dr Jamaluddin Jarjis is the Special Envoy to the United States. Not forgetting, Dato' Seri Tiong King Sin has been appointed as Special Envoy to the East Asia. The Special Envoy post is an addition to the existing ambassador posts.

It is worth to be noted here that countries like India, China, United States and Japan have long had ambassadors and other diplomats from Malaysia's representing our country there.

Thus, the establishment of the office of the Special Envoy is seen as unimportant and just a waste of public money. However, Dato' Seri Najib is likely to deny this statement by saying the Special Envoys are appointed to bring in investment opportunities and other benefits. For example, Samy Velu has good relations with India since he brought many Malaysian companies to invest in India’s infrastructure-building during his tenure as the Minister of Public Works. In that sense, Samy Vellu is the perfect candidate to bring Malaysian capitalists to invest in the emerging India or that’s what Mr. Najib thinks.

For me, this idea is unreasonable. Yes, the success of Samy Velu helping Malaysian companies to venture in India must be taken into concern, but what is the current Minister of Works, Dato Fadhillah Yusuf doing? Could he not continue to bring Malaysian businesses to invest in infrastructure developments in foreign soil? If not, why should he be retained?

Likewise are with all the other Special Envoys. If the existing Ministers and the current ambassadors are doing what their tasked for properly, the office of the Special Envoy should by any sense, be irrelevant.

Many may be wondering why I am pushing for this position to be abolished. Before you call me an opposition “cyber trooper”, I should duly explain. This is due to the fact that a Special Envoy is paid up to RM27,000 as monthly salary. This is greater than the net salary of the Prime Minister! And perhaps, there may also be other benefits. Assuming the position of Special Envoy eliminated, the amount of civil service’s emoluments can definitely be reduced.

Eliminate the posts of Special Advisor to the Prime Minister's

Currently, there are four positions of Special Advisors; Datuk Seri Dr Abdullah Md Zin (Religious Advisor to the PM), Datuk Wira Mohd Johari Baharum (Special Advisor on Northern Corridor Economic Region), Tan Sri Dr Rais Yatim (Advisor on Social Affairs and Culture) and Datuk Seri Shahrizat Abdul Jalil (Advisor on Women’s Development and Entrepreneurship). They are also expected to be paid with a hefty sum monthly, which eventually will result in soaring final figure of emolument.

It is never my intention to question the credibility of these four individuals and spread fallacies, but is Datuk Seri Dr Abdullah Md Zin’s post really necessary since Dato 'Seri Jamil Khir is the minister responsible for Islamic affairs? Should Rais Yatim be appointed when Datuk Seri Nazri Aziz is in charge of the Ministry of Tourism and Culture? And most important of all, should Shahrizat Abdul Jalil be appointed as Advisor on the women’s development when the Dato Rohani Abdul Karim is responsible for the Ministry of Women, Family and Community Development? Was she appointed to the post just because  Dato Shahrizat is Wanita Umno chief, despite the fact that she has lost the election and was linked with the “Cow-gate” scandal?

Should civil servants' salaries be raised?

Yes, the government officials also need a pay raise, but any increment must be followed by improved quality and workmanship. But, is it happening in Malaysia’s public administration?

Public employees whom are not productive and are of poor quality are maintained in the government for fear of "losing votes". Several years ago, the Civil Service New Scheme (SBPA) was introduced and contained "Exit Policy", in which public employees will be evaluated every year and to those who scored less than 70% mark, will be sacked from the public service. However, the objection from CEUPACS (which later agreed with lower scores) and various other parties, SBPA has been replaced with the Transformative Remuneration Scheme which comes with no “exit policy”.

Malaysia currently has 1.4 million civil servants. For me, this is not so bloated compared to other countries because in Malaysia, army and police officials are also counted as public employees, unlike in other countries. However, we cannot and should not compromise with lacklustre performance of some civil servants and they need to be removed. Official statement shows that only 1.1% of civil servants scored less than 70% appraisal marks each year. If so, the "Exit Policy" should be re-introduced in a new form after discussion and explanation of all the parties involved. For this time, it is appropriate if a higher threshold mark of 75% -80% is set.

Conclusion

I personally agree with the rationalization of subsidies, but such attempt alone will not help the government to achieve or a balanced budget. My recommendation is Malaysia needs to reduce expenses in the payment of emoluments by putting the welfare of the people as the main intent, rather than to meet the "passions" of politics.

List PTPTN defaulters in CCRIS

Last year, many newspapers’ headlines revolved regarding Second Education Minister’s statement that errant PTPTN defaulters will be listed under Central Credit Reference Information System (CCRIS). This particular statement drew unexpected backlash from the masses and even from vocal ministers like YB Khairy Jamaluddin.

 

Yesterday, Education Minister II Idris Jusoh said Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) loan defaulters from 1998 to 2010 recipients will be given three months to start repayment before being blacklisted in the Central Credit Reference Information System (CCRIS).Notwithstanding the fact that the idea of CCRIS listing does not bode well with the people, a bigger question arises. Is it a bad idea?

 

To the uninitiated, CCRIS is a Bank Negara-database system that stores financial records of Malaysians digitally for references by financial intermediaries in prospect of a new loan issuance. Each and every individual’s financial track that has taken a loan from any financial institution will be listed under CCRIS. And so far, it has become a “custom” for any finance provider to refer to the CCRIS system before sanctioning a new loan application. It has to be made clear that CCRIS is NOT a bankruptcy listing system. Only the Department of Insolvency can declare a person as a bankrupt.

So, will an individual with a bad financial track in CCRIS be given a loan in future? That depends on the financial providers’ discretion.

The insinuation of errant PTPTN loan takers to be listed under CCRIS is a good idea and should be welcomed. Such move will hopefully create awareness amongst the loan takers to repay their debt as per the contract. Commonly, these errant PTPTN defaulters will be warned by three (3) notices before any further actions are taken. Thus, defaulting in loan repayment should never be an option.

But, it has to be reminded that only CCRIS listing will not do much good. Why, it could even lead to more problems if appropriate reforms in PTPTN do not precede it. And here are my proposed reforms for a better PTPTN scheme.

11. Payment starts six (6) months after getting a job

Firstly, PTPTN which aims to be a helpful medium for higher education dreams of younger Malaysians should never be a “stumbling block” in crashing their future. For a better service, PTPTN should come up with a better repayment schedule. Currently, PTPTN loan takers are required to repay six months after graduation. Looking at the current pace of Malaysia’s higher education institutions churning out more graduates, more are likely to be unemployed for the first six months or even one year after graduation in some extreme cases. Hence, if current system resumes, more defaulters will emerge and more will be financially-hurt. Thus, in my opinion, it is best if the graduates are only required to repay their debt six months after landing in a job.

  2.Abolish the current 1% administrative cost under Ujrah scheme

Next, as PTPTN is a government-formed body for a special purpose. Thus, it is best that interest rates are done away with for the PTPTN loans. Although only 1% flat rate is imposed under a new plan, it can still be considered as an extra-burden for the loan-takers. It is understandable that PTPTN has management and operational costs but it is best for the government to absorb the costs to allow no-interest to be given for the loan takers. This is much better than providing free education and more future graduates will be financially stable in future, unperturbed by a huge debt.

It is my sincere opinion that the Government and PTPTN can look into this and hopefully, a better system in PTPTN is born for common good. Graduates are the national assets and let’s not destabilize by our own ineffective moves.

  3.Set a common threshold for loan conversion into scholarship

PTPTN has introduced a commendable plan prior to this, by allowing students achieving First Class degrees to convert their loans into scholarship. However, this has failed to be fully effective as in the current practice, the tertiary higher institutions have different threshold Cumulative Grade Point Average (CGPA) to indicate first class degree i.e UM – 3.75, UiTM – 3.50, it is discriminative in nature for the students in institutions with higher threshold.

Thus, taking that into concern, CGPA threshold for converting loan to scholarship should be standardised at 3.50 (for Arts stream subjects) and 3.30 (for Science stream subjects). If such move is to be introduced, a level-playing field can be better fostered.

  4. Mandatory payment only after a certain salary limit

Whilst it is commonly understood that one is bound to repay his or her loan as promised, the struggle of the current and upcoming graduates should be focused. With sky-rocketing cost of living coupled with slow increase in salary, the financial burden of a new graduate is of grave concern. It is noted that many, if not most graduates, can only expect starting salary of only around RM 2,000.

Thus it is proposed that PTPTN should allow the borrowers to repay only after their monthly salary hit RM 2,500. This is to ensure that the loan takers do not default and are in financially stable situation. The RM 2,500 threshold that I have proposed is created after taking into concern the examples I know. However, PTPTN is free to set other threshold ONLY after proper discussions with the stakeholders which MUST include the university students.

  5. Top-up PTPTN fund annually.

PTPTN’s highest-level administration often voice out that due to actions of defaulters, the fund amount is quickly shrinking and affecting future borrowers. This should have never happened. The unethical actions of defaulters (although some are financially troubled) should not be allowed at the expense of others.

Thus it is recommended that the Government should top-up the PTPTN fund every year to make sure all financially-vulnerable varsity students’ loan application be sanctioned. Critics may claim that such approach is counter-productive to the fiscal consolidation measures of the Government because it increases spending. However, all quarters should understand the importance of higher education and provide access to financially-struggling students through such approach. This is apparently better that providing universal free education which serves as blanket subsidy.

66. Scholarship recipients should not receive PTPTN loans.

PTPTN ought to make sure that any recipient of scholarship, particularly from JPA should not be entitled to PTPTN loans. Certain cases have been noted that those receiving JPA’s PIDN scholarship are also receiving PTPTN loans. The worst part is where the loans are invested in higher interest-yielding trust funds to earn money. This is how some students are becoming “financially-creative”.

This could be remote examples but should not be taken with ease. There could be more cases in Malaysia and these unscrupulous students are “stealing” the opportunity for education financing from those whom are more in need.

Conclusion

PTPTN needs reform and it’s crystal-clear. Pursue all these reforms and other appropriate measure before listing the defaulters in CCRIS. This will ensure the sustainability of PTPTN fund.