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Sakmongkol ak 47

Tuesday 28 July 2009

Paths to Prosperity

The very cerebral Din Merican in his latest posting has a few video clips about Milton Friedman and Naomi Klein. He has invited a few bloggers including myself to a debate/discussion on the ideas of Friedman and Klein. In all humility I am afraid I will not be able to do justice to a direct and exhaustive analysis of the ideas of the two protagonists based on the video clips. However, as many readers have noticed, I am more interested to test the applicability of Friedman's ideas in the local context. Here is another gloss on Friedman's ideas.

The role of government is a central theme in Friedman's ideas as a public intellectual. His insistence on minimal government interference into the economic affairs of people reaches a point of 'nuttiness'. The last remark was made by another Economics icon, Paul Samuelson. Just to mention: Paul Samuelson entered University of Chicago at the age of 16 and in 1941 produced his highly technical (calculus and high maths) in his Doctoral thesis- Foundations of Economic Analysis. A first reading of this thesis can be intellectually overwhelming as it did me in 1981. The two have vastly different approaches in managing the country's economy.

We see two differing paths to economic prosperity adopted by Malays and Chinese. I think it's worthwhile to examine how the different paths adopted have led to different outcomes. On the whole, the Chinese are more prosperous than Malays. Malays lag behind as a result of excessive government while Chinese despite minimal government interference have surged ahead. Or perhaps the Chinese thrived because of minimal government involvement?

Just recently, a former prime minister of Malaysia, reminded us of the stark reality. The Chinese since 1970 has emerged to control about 50% corporate equity while Malays owned 20%. That 20% share of corporate wealth, represents the economic aspiration of 14-15 million Malays or 60% of the population. The Malaysian Chinese who constitutes 25% of the population controls 50%. Although, not exactly true of the reflection of wealth in this country, the distribution of equity wealth, is taken as representative of overall wealth distribution. The Chinese in fact owned the greater part of this country's wealth. The Chinese are recent immigrants to this country, as the populist explanation promotes it. Yet they have come to dominate us? Who let this happened?

In this short article, I don't propose to ask the question often asked by one group in Bernad Lewis's scheme of things. (See Bernard Lewis- What went wrong?). According to Lewis, when people faced calamities, hardships, extreme problems, they fall into 2 groups. The first will ask how and why these things happened to us. The second asks who did this to us? The second looks for some one else to blame. The first wants to investigate the causes behind the things that happen. I choose the first group's approach. By looking out for causes, we choose to be objective.

Similarly, we face the same choice in the issue of wealth ownership in Malaysia. We can debate the politics of wealth distribution endlessly till we are blue in the face and the cows come home. We can ask who caused us to be poor or we can inquire as to the causes of unfair wealth distribution.

Let's examine why the two different approaches led to 2 different outcomes. Malays operate their economy under extensive government patronage. Chinese operate under minimal government intervention. Prosperity for the Chinese occurred under a climate of least government intervention. Malay economics actually slowed during excessive government participation.

Allow me to provide a more specific example. In Kuantan, there is a Chinese property developer- ALAM TENGGARA SDN BHD. It competes with a GLC owned property developer; let us refer to as X Corporation. On its own, X-corp. can never compete with ALAM TENGGARA nor I suspect with any other china man owned property developer. X corp. recently has shown business activism but only after having JV's with other china man owned businesses. Even in JV's X-corp. is reduced to a minor partner. In a massive property development venture, developing a gargantuan mall on a state owned land, our GLC managed to obtain a 17% share. This is a JV on a very prime land where a kampung makcik can be expected to demand at least 30% share. But our GLC, in its infinite wisdom which is not to be questioned by any public spirited individual such as you and I, says, 17% is best.

On its own it can never compete. There was one particular year, its turnover was RM20 million, big perhaps for a GLC (which is accustomed to registering habitual losses). What was the turnover of AlamTenggara? RM 200 million. So in the Pahang state assembly, I suggested that this GLC may as well wound up.

Ok, that's a slight diversion to drive the following point. That chinaman company operated on their own, without any government assistance, clout or officious protection. X corp. gets land either free or on transferred prices, easily gets approval from government departments. With all the assistance from the government, it should have pulverized its competitors. X corp.'s performance is representative of the general performance of almost all GLCs in this country.

I was reading a book by Tan Pek Leng, Land to Till. It is a book that chronicles the contribution of the Chinese on the agricultural economy of Malaya. It is a rich account of the major Chinese planters in Malaya who thrived in spite of minimal government assistance. During that same period, there weren't any Malay plantations of any repute.

I have only one explanation for these two different outcomes. The Chinese practise more capitalism than Malays. They operate under a more permissive laissez faire economic regime than Malays. The extent of governmental intervention or participation through Chinese based political parties is minimal. Chinese political parties function basically as representatives to ensure the rules of economic game are not unduly and excessively disturbed. After all the Chinese will say- they just want to cari makan. Chinese businessmen actually prefer to left alone pursuing Adam Smith's 'their own self interest'.


Anonymous,  28 July 2009 at 11:30  

Good example Dato.
I am mystified why our GLCs need to have a JV when they have the access to the necessary resources..
Most probably the Chinese owned private company use the same architects,engineers,marketing agents,bankers etc.
If the GLC does not have the managers inhouse they can always source for the right team..
Is the issue their internal mgmt style?Johor Corp hv intrapreneur schemes that seems to work well.

Will be good to do a case study on this...any takers?

Fi-sha 28 July 2009 at 13:28  


Good afternoon Datuk Sak

I was about to put my thoughts on chinese people when your article came in.

As i passed by Chinese Assembly hall last night, i remembered the scenes from the Late BH Teoh memorial done last week. The crowd was huge comprising people from all walks of life, races and religions. They came with their own will, with their own money (which are not that much anyway). Gosh, I could still hear the thunderous claps last night.

I realised - the only assembly where malay leaders could attract such crowd would be UMNO GA but heck, the UMNO members' trips are fully funded, even to include the entertainment allowance, where they could shop and dine till they drop at PWTC and The Mall. Still, malays barely own 20% of corporate equity? Wow, thats really stinky result of grandeous NEP and UMNO GA.

I like to quote you here Datuk: -

"After all the Chinese will say- they just want to cari makan. Chinese businessmen actually prefer to left alone pursuing Adam Smith's 'their own self interest'".

As much as the chinese people are busy pursuing their own self interest, they never forget the less privilegeds. Their clan associations are great examples of their philantrophic acts that go beyond their self interest.

A chinese friend of mine, a daughter of a farmer in Selangor, managed to go for tuition classes and learnt how to play piano - thanks to her brethrens. Later, she went to SG under The Little Red Dot's scholarship and the rest is history. She managed to bring her family out - way out of poverty line. Just imagine how many more lucky under-privileged chinese kids out there who made it big and make a lot of difference in life.

Cumulatively, this propels them so far ahead of Malays in Malaysia in many ways and we (oh well, you know who they are) get so pissed off. Is it theirs or ours fault?

Do we Malays rally and stand united on matters that matter to most people out there - education, standard of living, justice and humanity? Hmm, I've never seen one so far. Instead, we politicise them and we make them so much a privilege, instead of rights to all citizens of Malaysia.

Lets be the right 'capitalist' - like Bill Gates who calls for creative capitalism that creates a profit while helping the needy - instead of that greedy and disastrous capitalists in Wall Street.

Some chinese are 'kiasu' but we malays seem to be doubly 'kiasu', especially to our own people, don't you think Datuk?

"Aid can work where there is good governance, and usually fails where governments are unable or unwilling to commit aid to improve the lives of their people" ~ Lee H. Hamilton

p.s. Datuk, I hope i would live to see Malays from UMNO organising such event where we, malaysians, regardless of races, religions and creed, would join and support such cause.

Ree,  28 July 2009 at 17:11  

Hi Dato Sak,

Its not Bumi 20%, Chinese 50%.

The equity ownership breakdown (as stated in 9 Malaysia Plan) are as follows:

Bumiputera = 18.9%
Chinese = 39%
Indians = 1.2%
Others = 0.4%
Nominees (?) = 8%
Foreigners = 32.5%

The percentages above exclude government (federal and state) holdings eg Khazanah, Petronas, State GLCs. However, the Bumi percentage includes Bumi funds like ASB and LUTH.

Anyway, you know my stand that all the above is meaningless as a basis of wealth as the percentages refer to nominal values.

Anonymous,  28 July 2009 at 17:38  

The big difference is that the Chinese workers have to work hard or they might loose their job. As for the Malay workers in the GLCs and other govt dept., job security is assured 99% of the time.

Lick the right boots and pull the right cables, adacadabra, one goes up the ladder.

Anonymous,  28 July 2009 at 17:53  


Good posts for yr tireless efforts.

For the good of M'sia!

Yet, most of the feedbacks (& getting sicks of reading them) r still locked into the mode of me-against-u.

What takes?

Cant these people THINK as MALAYSIANs (pun intended) for just a tiny minute second?

Hello, the world outside dont see US as Malay, Chinese, Indian or Dlls. They see us as M'sians, who r their competitors. Period.

Or is it within this people's slumbers, there is a subconscious effort, working overtime to close them into their tempurung?

Apparently, what happened outside that tempurung is none of their concern. Their immediate concern is that inside that tempurung, all things can still be cozy enough for the near future(how near wrt the temporal shift???). Anything further (how far down wrt the temporal shift??????) is just not registered, even though the red flags of all stages of the administration r blinking like hell.

Their tempurung is a sealed time capsule, where everything should be as status quo as the instant when everything is put into that capsule (read M'sia after 69)! Even though outside that capsule EVERYTHING move on with tachyonic speed.

The paradox of those outsiders looking towards the future for challenges & new ideas while those inside the time capsule looking backward to past histories for shiok-dirism.


Anonymous,  28 July 2009 at 18:00  

Sak - doesn't culture determine attitudes, especially to business, and therefore economic success?

As it takes generations to change cultural traits, we must resign ourselves to being dominated by the chinese in business!


Anonymous,  28 July 2009 at 18:29  

Hi Dato,
Sometimes for fear of offending my Malay friends, I don't highlight what you have pointed out about the extreme assistance given to them. Yet in spite of that (though we envy the huge subsidies) we chinese haven't done that badly have we? Living now in a distant land and reading about the rotten state of affairs in my beloved country the only thing I miss is the food. On that score when I chance upon this news clip in one of the MSM papers, I laughed till tears stream down my eyes. Please indulge in this diversion from politics as it really shows the funny side of Malaysians which must surely transcend all races - enjoy -

" when a hawker and his two customers saw a car heading at full speed towards their stall, their first instinct was not only to save themselves but also the bowls of laksa that they were eating, reported Kosmo!.

A Proton Iswara crashed into the stall after colliding with a Nissan Sentra at the junction of Kampung Guar Jentik, Beseri, near Padang Besar, on Sunday.

In the 1.30pm incident, hawker Dahli Saad, 36, was making a bowl of iced shavings while the two customers were eating laksa.

“I heard a loud bang and saw a car spinning towards my stall.

“Without thinking, I screamed and ran, carrying with me the ladle I was using. My two customers also ran for their lives, taking with them the bowls of laksa and drinks that they were having,” he said.

- hope you and readers can take the time to laugh at this.

Hi&Lo 28 July 2009 at 20:49  

Dato, Not everyone is cut to be in business. altho am a chinaman but have no head for conserving wealth. I am not ambitious and just like to be simple me.

By the way, i love your thoughts and critiques.

Jimmy Tham 29 July 2009 at 08:29  

Good natured man doesn't need religion (politic) to be good, but it takes a religion (politic) for good man to kill each other.

We're after all a small country with a population of mere 24 millions. I wonder what does it takes for people to see through the colour of the skin and treat each human being as itself.

Anonymous,  1 August 2009 at 02:21  

tok sak, can you pls find out who is the chinaman behind the east coast mall and who is behind that chinaman who manages to arm-twisted pasdec ? there must be some powerful -more powerful than politicians - twisting the arm of the menteri besar. can it be no 1 or no 01? to sak janganlah hentam pasdec management sembarangan - do a bit of investigationlah. kalu hentam keromo- budak darjah enampun boleh buat.

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