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Sakmongkol ak 47

Sunday 29 November 2009


Everything with the suffix 'gate' is ominous and calamitous. Just look at the following issues.


There's a heated debate about BTNgate at the moment. It's a school for brainwashing and indoctrination. Not good for the country. We have thousands of rampaging zombied Malays brandishing Hishamudin's favorite weapon thirsting for Chinese blood and others. Since 1974, when BTN was formed, we have had many racial skirmishes. That would have been the storyline suitable for BTNgate.

The fraud and hypocrisy peddled by BTN will crumble under their own weight. You can't continue feeding questioning public with lies and misinformation without reaching a point, when it's no longer going to be accepted. That way, BTN loses its credibility. I am not saying those things BTN stand accused of ,did not take place. Knowing the standard of facilitators I am sure they happened but not to a sufficient extent to turn BTN into a crass propaganda mill. Asking for its dismantling is like burning the whole mosquito net on account of a single mosquito.

BTN is not compatible with 1 Malaysia. How so? Because it teaches Malay supremacy- ketuanan Melayu. How so still? Oh—they are using the dreaded song Anak Kecil Main Api to inflame Malay spirit. Because it says this land of ours are owned by others. IT WILL, IF MALAYS CONTINUE TO SLUMBER.

It's a song that consolidates Malay prejudices. BTN is nothing other than a brainwashing school designed to mentally subjugate the Malay masses in order to perpetuate the rule of Malay robber barons. I would have loved to assail the Malay robber barons if I can use this BTN issue for that purpose.

What kind of song do we want to serenade the Malays with then? With mournful songs, comes the answer. Listen to what Zaaba wrote way back in 1927 on a song preferred by the Uncle Tom Malay.

Tell me not in mournful numbers

That the Malay is a dying race

For their soul isn't dead with slumbers

Even in the old miserable days

Tell me not in mournful numbers

The way to improve the Malays

For surely every Malay remember

Be contented and modest-always.

Some people get spooked by the kind of message in the Anak Kecil Main Api song. They prefer the song above.

Zaaba and many of us prefer this kind of song.

I tell you not in mournful numbers

That the Malays are a dying race

I want only the soul that slumbers

To wake up and work in these bright days

I tell you not in mournful numbers

The way in which to improve the Malays

I want that each Malay remember

Modest, contented shouldn't be always.


Then there is the Ariffahmigate. He is the son in law of TG NiK Aziz who is being investigated by the MACC. For some UMNO people, anything that comes in the form of a son in law is fodder for their canons. People are scavenging upon this SIL as though it's going to be the spark that will torch Kelantan ablaze. This fahmigate is seen as the window of opportunity to unseat Nik Aziz so that the leadership that comes after him will be easy pickings for BN. Accordingly Dato Mustapha Mohamad wasted no time is telling its time for Nik Aziz to go.

How does the presence of the sil threaten the position of Nik Aziz as MB? By suggesting that Nik Aziz has been responsible for nepotism. The same disease has ravaged UMNO to the core and worse but yet no one has been called to account. Thus it sounds sanctimonious for UMNO people to judge Nik Aziz.

The sil is said to have done what? Has he embezzled money belonging to the people of Kelantan? Has he transferred more than RM10 million to banks in Bangkok?

I think the fahmigate is invested with too much importance and significance, erroneously considered usable as an excuse to unseat Nik Aziz and along with him Kelantan. It's premature and wishful thinking. Unless UMNO Kelantan learns to make a better mousetrap, this fahmigate is miniscule to hundreds of gates within the UMNO and BN compound. Certainly Ibrahim Ali who has joined in the chorus asking Nik Aziz to go does not offer one.


Bala is the cop who went missing after issuing an SD implicating the PM in the murder of a Mongolian. He came out with a second SD renouncing the first SD. Now he has come out from hiding in Bangkok ad Nepal and to say that he was persuaded and threatened and forced against his will and better judgment to repudiate the first SD. He has fingered the PM's younger brother as the person persuading him to do that.

Now, this is the part that I find disturbing. The PM and his brothers have achieved prominence in their chosen fields sufficient to be regarded as the Kennedys of Malaysia. Each has achieved some level of high profile. A second brother is a lawyer. A 3rd oversees the family's finances and is a businessman of some repute. A 4th brother is an architect who is accused by Bala as the person negotiating with him to save the PM. The youngest is a foremost banker.

Now, it would take the PM an extraordinary lapse of the mind and monumental error in judgment in asking a well known younger brother to negotiate on his behalf at a place frequented by the public.

Just ask ourselves, is such a story credible?


The BTN issue


The PM should not be goaded into dismantling the BTN. Generations of participants (students, government officers) have gone through various BTN courses without adopting the bigotry decried by many.

I have attended talks and ceramahs carried out by BTN speakers. I didn't think they were hate speeches. If at all, I found them to be informative and instructive.

Many have also benefited from some of the social programs funded by BTN. The outward bound modules teach team building and group think. I have never heard of non Malays being referred as to as Jews or derisively as a Golem.

The PM shouldn't be cornered into making a hasty decision on account of a polished and made-for-movie presentation by a cabinet minister. A reasoned white paper is a better alternative source on which to decide.

Exception rather than a rule.

Let's accept that some facilitator did say that Chinese are the Jews of Malaysia or the East or something. Has that kind of indoctrination created a sea wave of general resentment towards the Chinese?

It's also interesting to note that Kelantanese are also referred sometimes as the Malay Jews as a result of their business acumen and sharp business practices. I think they are called that more so because of their industriousness in general. Do other non- Kelantanese carry on with life burdened with hate and resentment towards Kelantanese?

One meets with the same negative answer with the referral of the Chinese as a Malaysian Jew. The test is has the person who has heard that blatant and racist bigoted statement continued in life with that 'germ of divisiveness'? Obviously he/she is repulsed by such bigotry leading that person to now denounce BTN.

The further point is- the BTN which was set up in 1974 shouldn't be dismantled on account of this particular and localized narrow-mindedness. The reason is that such a chauvinism in not sustainable in light of rising social consciousness.

Let's not be petty minded on account of a localized and isolated incident of bigotry. Let us also not be petty minded and nit picking on a song meant more to jolt the Malays into heightened social consciousness. More animosity and contempt are stirred up by insensitive policies adopted by political parties than what BTN does.

The Selangor government thinks the worse of course participants. They think these people are malleable putty, easily contorted and brainwashed. What has the recent General Elections showed? No amount of brainwashing can conceal your weaknesses and the people have shown this during the GE12. That, despite of so many having been 'brainwashed' by BTN.

So when people say be done with BTN, please identify which aspects of the BTN they find revolting and abusive?

What tactics do you employ to persuade a liberal-minded PM? It's a shameless flattery in trying to knock off BTN by comparing it with the concept of 1 Malaysia when the 1Malaysia concept has not yet been accepted in the first place. 1 Malaysia itself is contentious and one would be fooled into believing that if BTN is abolished, that means 1 Malaysia is accepted. That's an old trick used by Lim Kit Siang.

BTN stands for Biro Tata Negara. It was formed way back in 1974 and was probably thought as a means to instill a mental revolution especially among Malays to awaken from their slumber. To wake people up from centuries of mental subjugation, would require some shock tactics. None more shocking than to dramatize our past.

It's a government department responsible for instilling civic consciousness among Malaysians. It has also financed many programs conducted by NGOs. Normally, when it finances these programs, BTN officers will be given a slot to speak on a number of issues.

BTN has recently come under severe criticisms. It is accused of planting the seeds of divisiveness incompatible to the new national slogan of 1 Malaysia. Many websites and writers have joined in the widespread condemnation of BTN.

One website carried a video of the initiation song of BTN participants. Generations of ITM students were also serenaded with this particular song- Anak Kecil Main Api. I have listened to the songs many times and truth be told, couldn't decipher what's the fuss is all about.

People are moved by this song according to their understanding level. You make out the song according to your level of understanding capacity. You walk out with a Pollyannaish attitude or you come out with extreme pessimism and paranoia seeing enemies around every corner. Has that song created the latter?

It tells about the lot of the Malays falling behind other races. It doesn't blame other races for the Malay predicament. It tells how once upon a time Malays achieved glory. Reading in between the lines one can immediately understand the message. That Malays can achieve the prominence once achieved by their ancestors by working hard.

It's an uplifting song with no sinister motive. It's not a KKK song or Mary Phagan Anthem exhorting Malays to kill Chinese or other non Malays. Mary Phagan was a Caucasian girl allegedly murdered by a Jewish American named Leo Frank. Her murder led to the emergence of an organization known as Knights of Mary Phagan which later became the KKK.

The BTN was set up to instill passion in the spirit of Malays. It owns up to the fact, that the lot by which the Malays now find themselves, is the result of their own efforts or lack thereof.

No, it doesn't not teach participants that Chinese are Jews. BTN does not instill hatred. Perhaps for the Selangor government, the chickens have come home to roost. BTN becomes a convenient scapegoat.


Friday 27 November 2009

Sieg Heil Economics-2

Noble objectives, disappointing results.

Malaysia's version of the New Deal began operating since 1970. Officially, we knew the deal by the name of NEP which ended formally in 1970. The same idea continues today in various forms of 'planning institutions' but each carrying with them, the same seeds with a common ancestry- the idea of enlarged government participation in the economy. We can also call this tendency, the collectivist mindset.

When the NEP ended officially in 1990, the inherited collectivist mindset came up with a new economic agenda. It was succeeded for example by the New National Development Policy and now the New National Agenda. Even now, collectivist tendencies lie behind the formation of the various corridors that's enveloping almost the whole of Malaysia. They are in reality, specific forms of enlarged government involvement in the economy. They share the common trait of bearing the same collectivist tendency.

Hayek warned of this tendency in his discussion on the Omnipotent Elected Assembly. It means the people who have governmental powers confer unto themselves the authority to be the final arbiters of the destiny of the rest.

Before we go on, we need to ask this question: are the Malays against market economy? If left on their own, every Malay would wish to pursue the economic vocation that interests them and hence they remain true to Adam Smith's- each pursuing their own interests. They can accept free market economy but in practice, they wish exceptions to be made for them. Why so? Because they command majority political support and as Hayek pointed out in a lecture in 1973:-

Majority rule and special interests

The reason is that it is now generally taken for granted that in a democracy the powers of the majority must be unlimited, and that a government with unlimited powers will be forced, to secure the continued support of a majority, to use its unlimited powers in the service of special interests - such groups as particular traders, 'the inhabitants of particular regions, etc. We shall see this most clearly if we consider the situation in a community in which the mass of the people are in favour of a market order and against government direction, but, as will normally happen, most of the groups wish an exception to be made in their favour.

F.A Hayek, Economic Freedom And Representative Government, Fourth Wincott Memorial Lecture delivered at The Royal Society of Arts 31 October, 1973

Given the wishes of the majority, who could stand a chance for making even a preliminary suggestion that we unload the siege mentality? The political reality would be more in tandem with what Hayek said in the same lecture:-

In such conditions a political party hoping to achieve and maintain power will have little choice but to use its powers to buy the support of particular groups. They will do so not because the majority is interventionist, but because the ruling party would not retain a majority if it did not buy the support of particular groups by the promise of special advantages. This means in practice that even a statesman wholly devoted to the common interest of all the citizens will be under the constant necessity of satisfying special interests, because only thus will he be able to retain the support of a majority which he needs to achieve what is really important to him.

The majority is not interventionist. This lends credence to our own estimation that Malays are not anti market economy. Tun Razak, the architect of NEP gave a finite time span for the NEP because he knew the majority is not interventionist. That leaves only one reason why collectivist tendencies in our economy continue. The ruling party will not stay in power without the promise of special advantages as THE form of purchase to secure the support of particular groups. Note here, the support of particular groups, not the support of the majority.

The concept of 1Malaysia or the breaking up of the siege mentality stand in the way of the interests of particular groups. What is required of the PM is the indomitable will of a Mahathir with a humane face. He has the comforting assurance that the majority is not interventionist.

The root solution to solving the Malay economic problem lies then with the dismantling of the very structures which we have created that have proven to be holding back the Malays in general. The PM appears to have an understanding about this root solution but must tread gingerly. Similarly calls to break away from the siege mentality must be tempered with prudence in order to avoid becoming a casualty to the wishes of the particular special interest groups


Wednesday 25 November 2009

Sieg Heil Economics-1


After 1969, the answer to Malay economic problem is solvable it was thought through command center economics and centralized planning. A variant to this command centre economics and centralized economic planning is we get to play god in choosing who we want to advance. What developed is not only siege mentality but could be more appropriately termed the bunker mentality. The high seats once occupied by the money changers are now seating officious and benevolent G Men. They are the public sector money changers in the temple of the New Deal for Bumiputeras. Once you are ensconced inside the bunker, comforted by the impenetrable walls, asking these people residing there to dismantle that edifice will not be a walk through the park. You are going to get stiff opposition and outright denunciations.

This led to an economics which I termed as Sieg Heil economics. You actually choose people who you want to succeed. They then become salutary examples of the Malay can-do-anything spirit if given the license, quota, monopoly chance.

Hence we saw the emergence of handpicked and anointed super Bumiputeras who were given quotas, exclusive licenses, protection and so forth. To this very day, this kind of sieg heil economics- where the chosen one is expected to raise his hands saluting Malay-can-do anything spirit is still happening. Witness for example the license given to Naza Group to build a RM600 million Matrade Centre in exchange for land valued to be worth RM15 billion. To me, we must add a new definition to the concept of usury in the Islamic Lexicon.

Groups of benevolent public officials huddled together to plan the industry and improvement of the Malays. Of course we didn't see the extreme form of centralized planning such as the Mahalanobis gigantic input output tables in Nehru's India planning every minutiae of economic life of the Malays. That kind of planning wasn't sustainable because that kind of planning was discovered to be not so successful. The more potent reason for its disavowal was because it conflicted with the idea of freedom.

Unfortunately, the failure of omnipotent economic planning hasn't stopped the expanded role of government. The expanded role of government took different forms such as nationalization by other means as in the formation of GLCs and even direct ownership of the means of production. It also took the form of regulatory activities.

Just like Roosevelt's New Deal, the new approach to solving the Malay economic problem was accepted by the public as successful because it did achieve successes for the Malays to shout in triumph. From a share of around 2% in corporate equity, by the end of 1990, the share of Bumiputera equity in corporate wealth was around 19%. Though short of the targeted 30%, it was hailed as a qualified success better than nothing. Out of the whole thing, emerged the acceptance that enlarged government participation in the economy is justifiable as a means to remedy the economic problem.

The idea of a caring benevolent government resonated well with the consuming public especially the Malays and definitely with policy makers and politicians. It gave them an added source of omnipotent powers. Hardly anyone would argue for example with the government's agenda to care for the Malays from the cradle to the grave. Indeed as is the customary practice, policy makers in almost all the Dewan Undangan Negeri will justify expanded government involvement and outright ownership of the means of production and therefore budget deficits as necessary to carry out welfare programs for the poor. Who would want to oppose such noble intention if it's meant for the poor?

Have the programs succeeded? That is another issue. Each year, the number asking for welfare assistance in the form of cash disbursements seemed to increase rather than decrease. Dissatisfaction over the actual disbursements has aggravated rather than subsided. The number partaking in the welfare disbursements in the PM's own parliamentary constituency is growing each year indicating that the number of poor people is increasing as the magnitude of the disbursements increases. Or the increasing number indicates, more are joining the cue to get free gravy from the gravy train.

It means that this expanded role of the government hasn't worked well. It worked well for those in the bunker who happen to be the very ones bitterly opposed to the dismantling of the Sieg Heil economics.


Tuesday 24 November 2009

Money Changers in the High Seats of our Temple

1969 was our own cataclysmic economic depression of the 1930's. It brought to the surface, gnawing economic disparities between the major races in Malaysia. Most significantly, it exposed the economic deprivations of the Malays.

What caused it? The easy answer was capitalism or free market economy. The depression of the 1930s in America impressed the minds of the American people of the efficacy of government. Only the government can remedy the situation provided of course government is in the hands of 'good people' like us naturally. Good people like us naturally exclude those agitating for reforms and more naturally those asking for a break from a siege mentality.

From 1970 onwards, what we have is our own New Deal in the form of NEP. It sought out primarily to redress the economic problem of the Malays. We saw coming into being, various regulations and institutions armed with the explicit agenda of jumpstarting the Malays in various economic enterprises. A fuller analysis of our New Deal isn't the subject of this essay today.

What is the subject is the perception molded about government's role in the pursuits of our industry and improvement. The fundamental perception is this- active intervention of the government especially central government is the remedy to the economic problem. The economic problem disemboweled up to 1969, was viewed largely as the failure of market economy. Capitalism was the cause of Malay backwardness. Free market has largely benefited the more industrious and uninhibited Chinese. The conventional wisdom was, in order to remedy the situation is to enlarge the role of government and at the same time, put up with regulations to curtail Chinese economic enthusiasm.

In what form/s did this perception express itself/themselves? It took the form of allowing benevolent public servants, disinterested experts, assuming almost unbridled powers which once narrow minded and selfish economic royalists held that were widely abused. Businessmen are just not responsible people. 1970 was our own beginning year when "the moneychangers have fled from the high seats in the temple of our civilization". This phrase was used by Roosevelt when announcing his new Deal that sought to justify the enlarged role of big government.

In my opinion, the thinkers behind our own NEP were inspired by Roosevelt's New Deal in two senses; one- in accepting that the economic problem was the result of the failure of market economy and two- accepting in turn that the remedy is bigger government and therefore bigger and almost unchallengeable powers. I am now more convinced those thinkers of our own NEP didn't sit down to think of the problem from our own local perspectives and must have been studying excessively the NEW DEAL and adopting its approach almost carte blanche here in Malaysia.

The main by-product of this thinking is the change in the belief from individual responsibility, laissez faire and decentralized and limited government to a belief in a more robust government led of course by benevolent public servants and politicians. The new belief was basically about the role of the state. The state is now viewed as the power that is created to protect people from the vicissitudes of fortune and to control the operations of the economy in the general interest of the people. These roles must be agreed upon even if it involved, as we were to see from 1970, government ownership and operation of the means of production.

This idea fitted into the strategic thinking of Malay politicians because enlarged government role conferred unto them powers that would not be achieved if left to free market forces. It allowed them to build a fortress which Dr. Mahathir wanted to disassemble through his thinking in later years. What Tun Mahathir did not realize was that government money changers have occupied and entrenched themselves in the high seats in the temple of our civilization.

If the agenda of Malaysia is to be achieved, this temple must be invaded.


Monday 23 November 2009

The Road to Serfdom

Watch this video first:-

and then this:-


Sunday 22 November 2009

From Siege Mentality to 1Malaysia.


As paradoxical as it sounds and appear, the concept of 1Malaysia would require the Malays especially, to get out from being trapped in a siege mentality. The use of the term 'siege mentality' has stirred up a hornet's nest. Unjustifiably so.

It was said in the context of a necessity to adopt a positive attitude to cope with the many challenges faced by the Malay. The attitude required is one that minimizes the feeling of being besieged and hemmed all around, bullied and brutalized. Without that countervailing attitude, the instinctive response of the besieged person is to strike out in rage at everyone including people who want to help out.

Such an attitude is counterproductive. As I understand it, it's not the kind of siege mentality when one person or group feels it's encircled all around by threats of which some are real but many more just imagined, such that the only recourse is to be overly defensive and withdraw into their own comfort zones. That comfort zone can be formed on whatever premises- calls for ethnic preservation, hegemonic assertions, etc.

Getting out of the siege mentality simply means adopting a fresh attitude to be a conscious and active actor on life's stage. It's stepping out of the mental rut. It's adopting the attitude that we are responsible for our own fate and weaning off ourselves from excessive dependence on the government. Government assist or the command elements in securing life advances must increasingly be supplemented by intrinsic efforts. That is the core idea of getting out of the siege mentality.

If this is the call that KJ meant when he made his speech about getting out of the siege mentality, it should be supported. It's stirring up a storm because of the person saying it. Because they were made in response to the person saying it and not the idea, the storm raised is not significant especially if it was raised by the usual suspects of anti KJ forces.

Lest face it- the idea and concept is bombed because it's KJ who said it. Tun Dr Mahathir has been reminding of the same idea during his tenure as UMNO president. That was the concept which became the main theme in his speeches during the final years of his presidency. To reinforce his cajoling, Tun Dr Mahathir used all sorts of visual and audio effects- giving stern warning, shedding tears and so forth. He did to encourage the Malays to get out of a mental stupor. He didn't use the term siege mentality but the idea is similar.

Our PM now knows that's the only way Malays can take centre stage i.e. by jettisoning ideas and attitude that are holding the Malays back.

But to my mind, there is a more basic and fundamental reason behind the vocal objections. It is a defense against the dismantling of command elements in our society. What do I mean by the command elements?

1970 was like the US's 1930's for us. Racial animosity arising from economic differences was seen as a product of a failure of the market system. Up to 1969/1970, the market system has produced more evils than good. The chief evil being economic disparity among the Malaysian races. The evils were also the result of a limited government.

How to overcome these evils? People became attracted by the good that an overbearing government could achieve provided the government powers were in the right hands. People were attracted to the idea of an expanded government role.

Along with these changing ideas, came also a view about the relative responsibilities of individuals and government. Emphasis on the responsibility of the individual for his own fate was replaced by the emphasis of the individual being an outcome of government design. The government's role was seen as serving as a parent charged with the duty of designing life for individuals. These views came to dominate the thinking of many people until the present day and perhaps found their latest expression in the condemnation on the author of the phrase 'siege mentality'.

In a very telling passage in their book "Free to Choose' Milton and Rose Friedman wrote:-

They have led to a growth in government at all levels, as well as to a transfer of power from local government and local control to central government and central control. The government has increasingly undertaken the task of taking from some to give to others in the name of security and equality. One government policy after another has been set up to regulate our pursuits of industry and improvement.

These ideas suited the cloistered mentality of the Malays who have lived under centuries of feudal subjugation. Asking for a radical change in outlook requires a longer time. Dr Mahathir discovered this and admitted as failure his inability to shove the Malays out from their captive mentality.


Friday 20 November 2009

MCA: The Hindi Movie Effect

UMNO leaders mustn't watch too many Hindi movies. Watchers of these movies are easily moved by the dramatization by actors and are also agitated one way or another by theatrics. In short, Hindi movies have incredible persuasive powers to overwhelm our rational faculties. We cry and laugh with them. The movies are capable of subverting our rational faculties.

That Hindi movie effect on the mind is not suitable when it comes to handling a complicated matter such as the mess in MCA politics at the moment. A different mental skill set is required which demands solid rational approach.

Unfortunately, the minds of UMNO leaders appear to be taken over by the Hindi movie effect. These were reflected in the reactions of UMNO leaders when several MCA leaders, no doubt encouraged on by the MCA Health Minister to put up with some theatrics. One would be forgiven for thinking that Wee Ka Siong and Chew Mei Fun are consummate Hindi movie actors.

That's the effect they seem to have over the UMNO psyche. Tan Sri Muhyidin who is far away in Rome, was moved to say- MCA can't have unity on account of what has happened to the MCA youth and wanita leaders and particularly what has happened to Liow.

UMNO's greater interest is to see the operation and success of MCA's GUP. UMNO's interest does not lie in looking out for Liow or the MCA cry babies.

What the MCA president has done in restructuring the presidential council (as I understand it, his kitchen party cabinet) is odd, but not wrong. It's provided for by the MCA party constitution. Now who are we UMNO to say about whether the MCA constitution is right or otherwise? The MCA people adopted and accepted their constitution and that just doesn't allow UMNO to put its weight on MCA.

I say, let the whole MCA matter runs its natural course. Allow the MCA leadership to sort out their problem their way. If Ong Tee Keat thinks and his fellow top leaders accept that what he's doing furthers the cause of GUP, allow the water to rise up to its own level. We must remember, the original protagonist and antagonist in the current MCA politics, Ong Tee Keat and Chua Soi Lek have adopted the GUP. UMNO's interest is to see the plan agreed to by these two succeeds. Its interest does not lie by being seen as prolonging the mess by coming to the rescue of Liow and his fellow cry babies.

The 2 MCA wing leaders are not out of the CC but out of the Presidential Council. The structure of the Presidential Council is under the absolute discretion of the MCA president. If he is saddled with recalcitrants who continually and habitually show defiance by not cooperating, or even absenting themselves from the P council, it would be stupid for Ong Tee Keat not to replace them with people who are more positive towards the GUP. I say, it's odd, but not wrong for OTK to do what he has done.

MCA's Article 46 of the Party Constitution reads:

"There shall be established from amongst the members of the Central Committee a Presidential Council which shall consist of the President, the Deputy resident, one or more Vice Presidents, the Secretary-General, the Treasurer General, the National organising Secretary, and not more than ten (10) other members appointed by the President in his absolute discretion, who likewise may terminate such appointment if and when he thinks fit."


Thursday 19 November 2009

Economic Corridors and our Fatal Conceit.

The luster of the economic corridors is fading as the hard evidence about their success is very sparse. The Singaporeans are not coming in droves into Iskandar region. In the other corridors, the economy hasn't taken off beyond the pyrotechnics and dry ice smokes.

In Pahang for example, there was much spectacle about planting 8000 acres with a new species of pineapples. Also in the show, was the rearing of Boer and Jamnapari goats. These two ventures could easily be handled by the state's own agencies. We don't need ECER to tell us that. The goats too were brought in from goat farms so that the PM, the MBs of Pahang and Kelantan can enjoy stroking the kids.

Other than that, what is the public's perception of ECER? It's just another extraneous institution coming into existence to supersede and duplicate what can be done by the state. They have money all right, which will in due time degenerate into avenues for streaming money into a few selected beneficiaries. The ECER for example is headed by PETRONAS people. They may be ok in oil and gas industry, but that ok is not transferable into general business ventures such as rearing goats and planting pineapples.

There are now doubts as to whether the economic drive assumed to be inherent in the creation of the various corridors is there or not. The problem is, the boys advising on the economy think, everything can be micromanaged. In some ways I blamed our senior civil servants for not arguing the case against setting up these behemoths with more substantive reasoning and even probably pointing out to the unsoundness of such projects. Now almost 70% of the country is enveloped by these corridors thereby making the various economic development agencies in each state, seem superfluous.

If what I hear about MOF officers spending time yik-yaking eating potato chips while serious meetings about the economy are in session is true, then no wonder the text-book young guns occupying the 4th Floor can bulldoze through with their plans.

But I want to talk about the philosophical underpinnings of such esoteric ideas as these economic corridors. To me they are essentially extensions of the mind of central planner. Someone out there think they can micromanage our economic lives.

Last week I wrote several articles about the parallel economy and the lessons we can learn from it. The parallel economy is a live lab for studying the principles behind economic vibrancy to distinguish them from the formal economy so loved by our central economic planners. You have people still wetting their underpants impressed you with some economic models that they think are answers to break beyond the thresholds.

Look at the driving principles behind the parallel economy and our own formal economy. I am not asking you to look at the declaration that the parallel economy is the answer to the BN's NEP or something along those lines. That's a stupid way of engaging in a fruitful discourse. What's more meaningful is to realize that the vibrancy in the parallel economy is the result of relative de-regulation and economic freedom. The less vibrancy in the formal economy is probably the result of excessive government intervention and meddling by officious napoleons.

People are still besotted with the idea of centralization and concentration of power. They think they can substitute the spontaneous order of human economic cooperation with a detailed input output tables and plan every single minutiae of economic urges. The facts are they can't. We don't have to produce those elegant rebuttals against the attractions of centralized economic planning. It is sufficient for our practical purposes to see the principles behind the parallel economy.

The underlying principle driving the parallel economy is this:

The great advances of civilization, in the industry or agriculture, have never come from centralized government. Columbus did not set out to seek a new route to China is response to a majority directive of a parliament, though he was [partly financed by an absolute monarch. Newton and Leibnitz, Einstein and Bohr, Shakespeare, Milton and Pasternak….; no one of these opened new frontiers in human knowledge and understanding, in literature, in technical possibilities, or in the relief of human misery in response to governmental directives. Their achievements were the product of individual genius, of strongly held minority views, of a social climate permitting variety and diversity.( Friedman in Capitalism and Freedom]

I doubt whether those people behind Saville, Wisma Shun Li, Pearl Point and Elken Convention centre did what they did in response to directives from government officers. Harun Johari or Ikmal or whoever could have accomplished more if a social climate permitting variety and diversity is provided.


Wednesday 18 November 2009

The Pahang Budget for 2010

A budget primer for our Pahang ADUNs.

The Pahang state assembly is sitting presently. It is towards the end of the year. This means the sitting is about setting the budget for next year.

Once again, the budget is in deficit. This means our expenditure is more than our revenue. There is a budget gap. It is financed by borrowing. The state government incurs debts. If we add the debts incurred by Government Linked Companies or GLCs, the amount of total debts may be even larger. But this aspect is seldom touched by members of the Assembly. They would be busy trying to outdo each other in praising the MB for his courageous budget. They might as well say- carry on MB, we are BN. (named after the British comedy films 'Carry On)

ADUNs from the ruling government will be praising the MB. They will say, we need to spend on welfare. It is because we are spending on welfare, we have to incur deficit. They will also say, we are spending on agriculture and infrastructure and services and supplies. We spend because we need to look after the welfare of the people.

It's not that randy dandy. We must understand that once we have a budget, it means we have a finite amount. The amount has to be apportioned among competing uses. If we spend more in one area, it means we lessen the amount going to certain other places. So we have to exercise responsibility.

Much has been said about deficit. As I have said, on its own deficit may be bad or it may not. It depends where the deficit is applied to. If it is directed at development expenditure, our deficit is defensible. But if the deficit is directed at consumption expenditure- pay for increase in salaries of civil servants, pay for consumables, pay for supplies at inflated prices, then this type of expenditure is wastage.

Really a budget must be debated on the following points:-

  1. Accountability- was last year's budget adhered to? Remember we were the ones who agreed to spend X amount and if we spend X plus amount, we must answer why it is so. Is our tax base too narrow? Has our tax collection been efficient? Why has our revenues dropped? How can we improve earnings from our resource?

  2. Was the money spent effectively?

So Pahang has a budget deficit of RM 92 million. What proportion of the state's income is this? In the last few years, when the budget was tabled, we were never told how much income has the state produced? Remember, the government revenue is that portion which we have been able to collect in the form of taxes, contributions, interest, dividends etc.

In 2006 for example, Pahang's income or GDP was 22 billion. I will have to make assumptions here. Let's assume there has been growth in the states GDP. Let's assume in 2010, the expected GDP is RM 25 billion. Hence RM 92 million out of RM 25b is only about 0.37% which is manageable.

So the deficit is not a thing to be unduly worried as it is a small fraction of the state's GDP.

But then we must also study the amount of deficit in absolute terms. Is it rising or decreasing? Fortunately this year, it is decreasing compared to last year. For the record, the deficits for Pahang in recent years have been like a yo-yo. Sometimes up, sometimes down.

But we must be careful. If we detect this yo-yoing shows some consistency, then it raises the suspicions that the numbers may be stage-managed. This year, to keep criticisms manageable, the deficit is kept low. Next year it may be kept up. So, we must be careful when evaluating the numbers. See whether there is a pattern. I am not saying that there is, but keep looking.

Next, maybe we can compare the rate of increase/decrease in deficit with the rate of increase/decrease in state GDP. Suppose the deficit increases at a time when the state GDP increases. If that is so, we can ask, why is this so? That is, why is it, during good years when our GDP is up, we still incur deficits? That means, we fail to keep money aside during good years. We carry on spending. That will also mean, we don't exercise financial discipline. That will further mean that the slogans we used such as perbelanjaan berhemah- are just political slogans.

Let us ask another question then. How effective has our collection been? In 2009, we have collected say RM500 million from a state GDP of say 24,000 million. The collected amount represents 2.08%. Surely now, because we have been able only to collect a meager 2.08% is a cause for worry.

This means, our recovery efficiency isn't anything to shout about. It means our government institutions have not been very productive.

In terms of collecting performance, the Pahang government hasn't been able to move beyond collecting beyond 3% of the GDP. Why is this so?


Tuesday 17 November 2009

Economic Corridors- Our own Fatal Conceit? -1

This piece of news caught my attention.

Harun Johari has resigned as CEO of Iskandar Malaysia. Iskandar is the much heralded corridor for economic explosions in Johor that was meant to showcase what planners can do. To be more specific, what central planners can do.

Harun is the second CEO that has resigned after one Ikmal Hijaz. Harun's departure will certainly raise suspicions as to why the CEO turnover is alarming. This position is not your average run off the mill CEO of the typical loss making GLCs. This is the South Economic Corridor that is supposed to admit heavy duty traffic onto the investment highway of Malaysia. After that, the economy of Johor in particular and the whole country will be on the speed by which cars travel on the Autobahn.

Allow me to tell you about Harun Johari, the manger that we have lost. Before he joined Iskandar he was plucked out from Shell Malaysia to head the Port of Tanjung Pelepas. People are right to regard Harun as an introvert except to those close to him. Those close to him include his schoolmates from MC-gay-gay and those in Shell. He went to study in Australia and obtained a first class honors degree. When he was in Shell he was highly regarded and went up the ranks pretty quickly earning several cross postings. In Shell, cross postings are generally rewarded to those talents whom Shell see as likely to become leadership material. The current MD of Shell, Dato Mokhzani Wahab for example has been on several cross postings.

It is fair to say that Harun Johari was chosen purely on merits. He has the management pedigree (being trained at Shell) and has the mental prowess to stand on his own. He would have managed Iskandar to great heights if mentally-challenged and envy- filled government servants accustomed to doing things the officious civil servant ways don't meddle with the running of Iskandar. Hardnosed management is what we need to run a business entity as huge as Iskandar and a talented team. Charisma is for herding cattle- a much overrated virtue when it comes to managing a business.

Now that the matter of Harun Johari is put aside, let's talk about economic corridors in general.

The origins of these economic corridors were humbler. It was said that a retired SS in Johor offered some ideas to Johor MB on how to soak up the overhang of properties in Johor. The SS said why not open up the southern region by allowing investors from Singapore to take up excess capacity. In the first meeting attended by among others Dr Vincent Lim who was later wrongly credited with coming up with the corridor idea, the idea of creating an investment hub in Johor was mooted. The former Prime Minister, who was looking out for one great idea to claim as legacy, quickly adopted the idea and extended it generally. If we have a southern corridor why not have it also in the north, east, west and East Malaysia. That's how the idea of economic corridors came into being. It wasn't any idea conceived by Dr Vincent Lim.

Why on earth do we need them in the first place? Is the concept of economic corridor somebody's idea of dividing the economic turf n Malaysia among several economic mafias? What do they do actually? The corridors will in the end become vehicles through which to secure large amounts of money and then get them distributed to your own network.

What can economic corridors do that cannot also be done through the state? Take ECER for example of which I am a bit familiar. We in Pahang certainly don't need PETRONAS to tell us to plant pineapples or to rear Boer and Jamnapari goats. These ideas could have been more effectively carried out an empowered MB incorporated staffed by talented people.

You have a bunch of fresh faced graduates entrusted with sudden powers and they suddenly felt that they could centrally plan prosperity. This bunch of paper tigers are enamored with the great attraction of centralization. This is the fatal conceit spoken about by Friedrich Hayek. People think centralized planning will enable them more effectively legislate programs which they think are in the interest of the people at large. These include ideas such as transfer of income from the rich to the poor and from private to governmental hands. They are yet to realize what has long been appreciated by economic thinkers such as Milton Friedman that the great tragedy of the drive to centralization , as in the drive to extend the scope of government in general, is that it is mostly led by men of goodwill who will be the first to rue its consequences.


Managing IJN

Prime Minister Dato Sri Najib risks becoming unpopular if he succumbs to the idea of IJN reverting to a single structure like pre 2005. Suddenly the 13 head of departments and the 33 senior doctors found out they can't have absolute control over many matters most notably finances. We don't have problems with doctors wanting to go up the ladder in life provided they do it with a creature they owned. They can't do this with an institution owned by the government and the people. The management model which they are proposing will in effect take IJN private into their hands. Our main objection is that such a management model cannot sustain IJN as a center of excellence.

THE MANAGEMENT AND GOVERNANCE MODEL WHICH THE 33 ARE SUPPORTING IS NEITHER COMPATIBLE NOR ADEQUATE WITH THE AGENDA OF MAKING A MAYO OUT OF IJN. It's more suitable for a small GP's clinic with some locums. Accordingly the PM assumes the risks of IJN deteriorating in many aspects just because he has agreed to the doctor's presentation recently. Like many others, I am asking the PM to exercise prudence over this delicate matter.

I was ready to lay off the discussion on IJN. Then I read Rocky Bru mentioning something about it. I regard Rocky as the Godfather of Blogging who is responsible for making blogging an avenue for the voice of common people. His mention, suggests that this issue is still alive.

Let's be clear in this issue. The people involved in this issue, doctors and non doctors in IJN are proposing constructing models of management and governance. Doctors are proposing a single structure similar to that of pre 2005. In 2005, the doctors together with administrative officers, not happy with the single structure submitted a management structure and governance to EPU. The government through EPU agreed with the submission. We must inquire and probe why the management and governance model agreed upon by staffers at IJN is now disowned and in its place, the very one they sought to replace is revived?

The issue here is which is the contending model more suitable/amenable to the vision of making IJN a first class hospital or whatever grander name we care to give it. My principal contention is, a single structure isn't adequate for this purpose. If we want to become like Mayo, we must replicate as many of the substantive elements that made Mayo or Cleveland into such venerable institutions.

Many people I think are concern about this issue of how to keep IJN as an institution. In order to do that it must be supported by a management and governance model that allows it to be so. Such a model is the one accepted after the pre 2005 model was replaced. The current one isn't by all means perfect. Indeed the management at IJN took the very rational step of inviting a business consulting group to evaluate a suitable governance and management model. The consulting group brought in by the IJN people is not a lightweight in this very cerebral industry. IJN brought in the Boston Consulting Group which re affirmed that in order to become an institution like Mayo and Cleveland, IJN Must have a governance model as the present one.

Of course the findings of the BCG destroy the management and governance model promoted by the doctors. But instead of building a better mousetrap, they took the unprecedented and unscientific step of rejecting the findings of the BSG but not before IJN paying them RM3 million.

In my previous article, there were some responses from Dr Azlan who we found out, is a cardiologist at IJN. He has countered many of my points in my previous 4 essays. In doing so, I assume that Dr Azlan serves as spokesperson for IJN.

It will take some effort on my part to response to his rebuttals. The one I am interested is his mention about management lessons from Mayo Clinic. He stresses that an institution like IJN has to be led by a physician. He quotes an act of parliament to support his assertion. I have no quarrel over this position he is taking. I am prepared to give it a qualified consent.

In my mind, that act is relevant to private hospitals and clinics and is of relevance only when IJN is taken private. But everyone says, IJN isn't going to be privatized, meaning, Dr Azlan's quote of the act is superfluous, no? Doesn't matter- at first impression, a hospital is about doctors and so doctors must lead them.

For the moment though, I would like to explain something about how Mayo is managed since Dr Azlan has made reference to that matter. We can Google about this or read a book on this.

Very early on, the founders of Mayo Clinic, the two Mayo brothers who were doctors did something which is opposite to what the doctors at IJN are doing. They created the Mayo Properties Association which later evolved into Mayo Foundation. They later surrendered all future earnings and assets to MPA. They became in effect, salaried workers to the Mayo Properties Association. What was the intention? The intention was to create an institution that could survive beyond the lifetimes of the Mayos themselves and place the whole institution upon trust.

This is vastly different from what our doctors are proposing that is to create a sendirian berhad business structure. The way Mayo was structured since 1919 was that no one has control over the earnings and assets of Mayo. The Association was to be directed by a self perpetuating Board of members serving without compensation. Documents relating to the creation of the Association revealed that no part of the net income of this corporation or of its property or assets upon dissolution shall ever inure to the benefit of any of its members, or any private individual. (Management Lessons from Mayo Clinic pp 98). This simply meant that net revenues from clinical operations must benefit patients and the community rather than fat salaries or bonuses of physicians.

The basic idea is to create a sustainable model for management and governance compatible with an IJN envisaged to become a Mayo duplicate. The question before us then is: which model, the one proposed by Dr Azlan or the 2005 model that qualifies as sustainable?

In the early 1920's the Dr Mayos created a board of governors consisting of 7 physicians and a non doctor. The board was responsible for the administration and operations of the hospital. Later it also formulated policies. They then created a number of committees. These include committees dealing with clinical practice, education, research, personnel, finance and others. These committees look after the different aspects of management. The committees served as training ground for future leaders as well as functioned as a means of schooling people on the management and business dimension of the health care industry.

Under IJN's scheme, the control will be exercised by the physician CEO and his BOD. They can determine how to apply the assets and earnings and how much their remunerations are. For example, last year, doctors at IJN earned more income and bonuses than did their counterparts outside who were hit by the economic recession. IJN has proven to be a shelter from the financial storm.

Who knows what the doctors at IJN think inside? Whether they are greedy or not will not be evidenced by what they say. Dr Azlan can quote Koranic verses or even allude to higher morals, but greed or some other baser instincts are always evidenced by your deeds and actions. If Doctor Azlan and his supporters claim they are not greedy, we have to see it for ourselves. The comments from a reader asking us to come see what cars the doctors are driving suggests that they don't lead ascetic lives.

I am not going to begrudge doctors on account of them using and owning prestige marquees but it would open them up to suspicions of also being motivated by wealth seeking actions. Sama sahaja dia orang macam kita. I find it distasteful and sanctimonious on the part of Dr Azlan's supporters to suggest that doctors are not concern about wealth and in doing so, they don't behave like other wealth seeking mortals.

That these things happen and even more so when we also hear of IJN doctors enjoying all expenses paid trips and what not by Pfizer, the drug company, strongly suggests that IJN doctors are not molded in the cast of Mayo doctors or that they are motivated predominantly by altruistic motives. Translation: Doctors, like mortals like us, can also be greedy.

How can you perpetuate this kind of behavior and interests? By having an organization that's amenable to them such as creating an organization that existed before 2005. That would allow people not like Dr Azlan to pursue the baser and less than altruistic interests.

Let me quote an example. On average, non medical staffers at IJN such as nurses earn RM5000 a month. Doctors? The grunt working doctors earn RM 8000 and the specialists take away as much as RM80,000 a month. Bonus time. It was decided that non medics get 3 months bonus and doctors 2.8. The idea was vehemently opposed by the senior doctors. You do the math- doctor earning RM80k a month gets 3 months bonus and nurse with RM5k a month gets 3 months bonus.

Take another example of irrational behavior on the powers that be in IJN to limit the number of anesthetists. IJN suffers from a shortage of anesthetists. The 6 of them have to work on say 3000 patients for a specific duration. If each sleep inducer expert gets 500 patients and charges a RM1000 per patient, he gets RM500, 000. Because of the severe shortage, it was decided to get in another 5 experts in this field so that the work burden can be lightened. The proposal was rejected citing various reasons among them; the prospective candidates are not good enough despite many of them having donkey years applying anesthetics on patients.

Just consider this. Isn't it likely that by having more experts, you would have to distribute the number over more doctors and hence potentially forced to accept lower earnings?

Sure, you can say IJN is what it is now because of doctors. Good ones too. But it's also true they became prominent because IJN exists as an institution. With government money, captive market and all that.

Going back to the management structure before 2005 can lead to:-

  • Abuses of position that can lead to misallocation of resources

  • The pre- 2005 structure is not suitable to become a sustainable model of management in line with IJN's target of becoming a centre of excellence.

I am sticking to the principle that if power is to be exercised, better in the county than the district, better in the district than the state, better in the state than at the centre.


Monday 16 November 2009

Pahang and her 900,000ha forest.

Even those who do not find the Pahang MB appealing for a variety of reasons, appear to applaud his decision to gazette 900,000 hectares of forest as inviolable heritage. That's an extraordinary move as it is radical. Necessary it seems, to provide Pahang with water catchment area.

In doing so, Pahang has created extensive neighborhood effects, which if left to market forces will be under-produced. That means if it is entirely up to market pressures, Pahang will want to exploit the forests and cut them down. That would be against public good not only in Pahang but for those who enjoy the spillover effects without having to pay. They become free-riders. So, Pahang wants to monetize these neighborhood effects so that they continue to be produced i.e. retained as forested regions.

I have written to support his idea of getting compensation from the federal government because of that. As there are many ways to bell the cat, I am hoping the federal government will accommodate this request for some form of compensation in some ways suitable.

Allow me to alter the MB to a very genuine concern- whether what he said becomes a guarantee that no future administration will dishonor. The Pahang people have been accustomed to seeing solemn declarations being broken. It isn't at all implausible for Pahang people to imagine his declaration now, will be violated in future. Circumstances, political expediencies may overturn the MB's pledge. It's one thing to proclaim something, but enforcing it is another matter altogether.

On that point, I find the comments given by a reader who calls himself Cikgu Ngah to be very pertinent and deserving of appreciation. Accordingly, I reproduce his comments below:-

Cikgu Ngah said...

Assalamualaikum Dato',

Pertamanya terima kasih kerana sudi menyiarkan pandangan saya. Dato' memanglah seorang yang demokratis dan memberi peluang kepada semua orang utk bersuara.

Keduanya, apa yg saya nak tanya betulkah 900 000 hektar hutan itu dijaga dengan baik dan tidak ada langsung aktiviti pembalakan dijalankan? Betulkah kerajaan negeri Pahang kawal aktiviti pembalakan supaya tidak menjejaskan alam sekitar? Apakah kawalan ketat benar-benar diadakan supaya kes curi balak tidak berlaku? Itu yang saya nak tanya. Saya tak hendak orang kata perishtiharan Dato' Nan itu hanya suatu 'lip service' saja, macam yg Tun Pak Lah selalu buat. Cakap banyak, apa hasil pun tak nampak. Itu yg saya maksudkan. Kalau benar-benarlah 900 000 hektar hutan itu terpelihara dan langsung tiada aktiviti pembalakan dijalankan, yg haram mahupun yg halal, maka saya ucap setinggi tahniah dan berbanyak-banyak terima kasih kepada Yang Amat Berhormat Dato' Sri Pak Long Nan kita. Moga Allah SWT merahmati Dato' Sri dan melanjutkan usia Dato' Sri. Kalau betul-betul hutan yg 900 000 hektar itu terpelihara dengan rapi, saya rela pi buat demonstrasi aman di Putrajaya menuntut supaya kerajaan pusat bagi wang ehsan pada negeri Pahang.

Soalnya betul ka tidak? Dari pengamatan saya sbg seorang rakyat biasa macam tidak. Tengok saja Cameron Highlands, makin gondol dan botak serta makin panas dan tidak lagi sesejuk dulu. Air sungai Jelai dan Sungai Lipis di kampung halaman saya makin berlumpur, berkelodak dan tohor. Saya rasa mestilah ini kesan daripada aktiviti pembalakan.

Tindakan Dato' Nan minta wang ehsan dari kerajaan pusat itu hanya akan jadi beretika dan bermoral jika beliau dan kerajaan negeri dapat membuktikan bahawa benar-benar hutan yang telah digazet itu dijaga dengan rapi dan sempurna sebagai kawasan tadahan air.

Satu lagi saya juga tak nak menyalahkan Dato' Nan 100%. Tentulah soal menjaga hutan di Pahang ini kerja Jabatan Hutan serta Pejabat Daerah dan Pejabat Tanah dan Galian. Kakitangan di pejabat-pejabat ini sentiasa hidup mewah dan kaya walau siapa juga memerintah dan mereka ini tak semuanya sokong kerajaan BN. Kalau Dato' Nan melakukan sesuatu untuk membersihkan jabatan2 ini daripada elemen2 yg korup, tidak efektif dan lembab dalam bekerja dan membuat keputusan, saya tidak ragu-ragu untuk mengatakan bahawa Dato' Nan patut menerajui Pahang untuk 10-20 tahun lagi. Tapi ada kah beliau buat begitu Dato'?

Maaf sekali lagi kerana tulis panjang sangat. Terima kasih

15 November 2009 23:06

So how do you guarantee what you have said? Some ideas:

Since what the MB has said is a radical idea, it needs a radical format to sustain it. Why not write this provision into the constitution. After all, people are wary of the fact that gazette can be de gazetted. Once you have it written into the constitution, it takes a more elaborate process to undo it. It will take 2/3 majority to change it. That's easily done you counter- because BN controls the House. They do, but doing so can also attract adverse publicity, condemnation and public opinion does matter nowadays.

So, I would say, have it written into the constitution.

The problem is- do the Pahang ADUNs have the testicular tenacity and hardened resolve? (no pun intended, haha).

While on the subject of timber extraction and its exploitation also think of this suggestion. 2 years ago I suggested that felling of timbers by private companies be banned completely. Once its banned, any private timber felling will be unlawful and the transgressors immediately known to have broken the law. Apply the toughest legal sanctions against them- seize all property, freeze bank accounts. In Thailand, those caught cutting down timers are shot by rangers.

How do you cut down trees then? Only authorized cutters are allowed to cut down trees. These are appointed directly by the state government. All felled trees are brought to bonded stock yards- properly documented and accounted and counted. Whoever wants to buy timber for further processing will go to the bonded timber yard to buy whatever type of timber they want. They pay whatever duties and royalties for the timber they purchase.

By doing so, you prevent theft by unauthorized parties. Having to pay through bonded stock yard ensures that revenue losses are minimized.

Maybe the Pahang MB may want to consider some radical measures in support of his radical announcement.


Saturday 14 November 2009

Pahang conserving her forests: premium for neighbourhood effects.

Some people are not happy with certain aspects of the Pahang 2010 budget. It is still a deficit budget. We have explained that deficit in isolation isn't as bad as people think it is. It's bad if the deficit is used to finance consumption spending such as financing the increase in salaries and emoluments without that corresponding increase in quality and productivity.

It's also bad as it may hide incompetency and unaccountability and blatant disregard for financial prudence. It is bad as it can also reflect lack of financial discipline and poor planning. Poor planning for example may result from low quality human resource. You can't expect high quality work from low quality man power.

Some people are also not happy about the fact that MB has gazetted 900,000 hectares or over 2.2 million acres of forest so that these areas regions remain a water catchment area. The water it is said, benefits also states like Selangor and Negeri Sembilan and others. In doing so, the MB claims that Pahang has made sacrifices and is entitled to some form of compensation from the federal government. Milton Friedman and Friedrich Hayek call these benefits- the neighborhood effects.

One commentator accused the MB of trying to get easy money from the federal government. By choosing an easy way out, the MB has in effect concealed his limitations and the writer goes on to say, that it's time for the MB to be replaced. I am sure this suggestion will be hotly debated.

But let us not dismiss outright the MB's suggestion to be compensated just because he has a very direct and crude way of saying it. Instead let's discuss whether what he wants can be justified economically. 2 years ago, when I was an ADUN, I too suggested that because Pahang voluntary chooses to retain forested region so that it can provide water to other states and while doing good to others, the state bears the cost, perhaps it can be compensated. The cost is in terms of foregoing revenue that could be earned if the forest resource is exploited commercially.

In effect, Pahang has created positive externalities to consumers in states that have insufficient water. This external benefit would increase the utility of third parties at no cost to them. Other states can go on exploiting forest resource knowing full well that big Pahang is conserving its own so that they could enjoy having ample water. If the water is obtained at the normal price without incorporating a premium, then these other states enjoy the status of a free rider.

The Pahang problem is this. If it has a choice it would want to fully exploit its forest to earn more for the state. But to do so would be selfish on its part, yet it has no way to monetise the benefits it gives to the others. The rational economic agent will want to produce less of this good since it cannot monetise them- but Pahang chooses to continue. Hence what it is asking is that the public good it gives be monetised in the form of compensation from the federal government to ensure continued supply of the public good. All it is asking is monetization of its sacrifice so that the supply of the product is market driven.

Let us regard then, compensation from the federal government as being the approach to "internalize" third party costs and benefits. But, in many cases internalizing costs or benefits is not feasible, especially if the true monetary values cannot be determined.

This is why the role of the federal government is needed. For one, we know that the monetary values of externalities are difficult to quantify, as they may reflect the ethical views and preferences of the entire population. It may not be clear whose preferences are most important, interests may conflict, the value of externalities may be difficult to determine, and all parties involved may try to influence the policy responses to their own benefit.

Because it may not be feasible to monetize the costs and benefits, another method is needed to either impose solutions or aggregate the choices of society, when externalities are significant. This may be through some form of political intervention as when the federal government intervenes to adjudicate. The government acts to distribute costs and benefits that are not solvable by purely private transactions. The value of the compensation therefore can be seen as the form of economic adjudication.

So despite the MB's plebeian way of asking from the federal government, the idea can be economically justified.


For your Saturday Brunch

Economists! The Jokes are on you.( these jokes are adapted).

Man walking along a road in the countryside comes across a shepherd and a huge flock of sheep. Tells the shepherd, "I will bet you $100 against one of your sheep that I can tell you the exact number in this flock." The shepherd thinks it over; it's a big flock so he takes the bet. "973," says the man. The shepherd is astonished, because that is exactly right. Says "OK, I'm a man of my word, take an animal." Man picks one up and begins to walk away.

"Wait," cries the shepherd, "Let me have a chance to get even. Double or nothing that I can guess your exact occupation." Man says sure. "You are an economist for a government think tank," says the shepherd. "Amazing!" responds the man, "You are exactly right! But tell me, how did you deduce that?"

"Well," says the shepherd, "put down my dog and I will tell you."


A mathematician, an accountant and an economist apply for the same job.

The interviewer calls in the mathematician and asks "What do two plus two equal?" The mathematician replies "Four." The interviewer asks "Four, exactly?" The mathematician looks at the interviewer incredulously and says "Yes, four, exactly."

Then the interviewer calls in the accountant and asks the same question "What do two plus two equal?" The accountant says "On average, four - give or take ten percent, but on average, four."

Then the interviewer calls in the economist and poses the same question "What do two plus two equal?" The economist gets up, locks the door, closes the shade, sits down next to the interviewer and says, "What do you want it to equal"?


Three econometricians went out hunting, and came across a large deer. The first econometrician fired, but missed, by a meter to the left. The second econometrician fired, but also missed, by a meter to the right. The third econometrician didn't fire, but shouted in triumph, "We got it! We got it!"


A civil engineer, a chemist and an economist are travelling in the countryside. Weary, they stop at a small country inn. "I only have two rooms, so one of you will have to sleep in the barn," the innkeeper says. The civil engineer volunteers to sleep in the barn, goes outside, and the others go to bed. In a short time they're awakened by a knock. It's the engineer, who says, "There's a cow in that barn. I'm a Hindu, and it would offend my beliefs to sleep next to a sacred animal." The chemist says that, OK, he'll sleep in the barn. The others go back to bed, but soon are awakened by another knock. It's the chemist who says, "There's a pig in that barn. I'm Jewish, and cannot sleep next to an unclean animal." So the economist is sent to the barn. It's getting late, the others are very tired and soon fall asleep, Bu they're awakened by an even louder knocking. They open the door and are surprised by what they see: It's the cow and the pig!


Three economists and three mathematicians were going for a trip by train. Before the journey, the mathematicians bought 3 tickets but economists only bought one. The mathematicians were glad their stupid colleagues were going to pay a fine. However, when the conductor was approaching their compartment, all three economists went to the nearest toilet. The conductor, noticing that somebody was in the toilet, knocked on the door. In reply he saw a hand with one ticket. He checked it and the economists saved 2/3 of the ticket price.
The next day, the mathematicians decided to use the same strategy- they bought only one ticket, but economists did not buy tickets at all! When the mathematicians saw the conductor, they hid in the toilet, and when they heard knocking they handed in the ticket. They did not get it back.
Why? The economists took it and went to the other toilet.


When Albert Einstein died, he met three New Zealanders in the queue outside the Pearly Gates. To pass the time, he asked what were their IQs. The first replied 190. "Wonderful," exclaimed Einstein. "We can discuss the contribution made by Ernest Rutherford to atomic physics and my theory of general relativity". The second answered 150. "Good," said Einstein. "I look forward to discussing the role of New Zealand's nuclear-free legislation in the quest for world peace". The third New Zealander mumbled 50. Einstein paused, and then asked, "So what is your forecast for the budget deficit next year?"


Value of human capital

Engineers and scientists will never make as much money as business executives. Now a rigorous mathematical proof that explains why this is true:

Postulate 1: Knowledge is Power.
Postulate 2: Time is Money.

As every engineer knows,

---------- = Power

Since Knowledge = Power, and Time =Money, we have

--------- = Knowledge

Solving for Money, we get:

----------- = Money

Thus, as Knowledge approaches zero, Money approaches infinity regardless of the Work done.
Conclusion: The Less you Know, the more money you Make.


Bajet Pahang 2010

MB Pahang telah membentangkan bajet negeri tersebut untuk tahun hadapan. Sebagai rakyat biasa yang pernah menjadi wakil rakyat, saya sentiasa mengharapkan perdebatan dan penghujjahan yang bernas dari wakil wakil kita. Saya beranggapan bahawa selain dari pembukaan sidang dewan, persidangan mengenai bajet adalah kemuncak persidangan untuk mana mana tahun.

Ini adalah kerana, pada persidangan tersebut, kerajaan memohon kebenaran untuk mengeluarkan sejumlah wang dari akaun consolidated untuk membiayai pengurusan dan pembangunan negeri. Permohonan ini pun mempunyai signifikens yang besar- memohon kebenaran bererti kita harus sedar bahawa wang tersebut, bukan kita punya. Ianya kepunyaan dan milik negeri atau rakyat. Apabila perkara ini disedari maka, aplikasi dan penggunaan wang tersebut, menjadi suatu perkara yang akan di nilai oleh rakyat. Yang berada di barisan depan sekali, untuk menilai sama ada wang tersebut akan di kendalikan dengan baik, ialah wakil rakyat.

Tahun demi tahun, kita di beri tahu, hasil kerajaan adalah x jumlah nya. Semasa saya jadi wakil rakyat dahulu saya sentiasa mahu menanti kenyataan mengenai pendapatan negeri Pahang keseluruhan nya. Maksudnya, hasil kerajaan hanya merupakan sebahagian dari pendapatan negeri yang terkutip oleh kita melalui cukai, royalty, hasil dividen, sumbangan per kapita dari kerajaan persekutuan dan sebagai nya. Maka, hasil kerajaan adalah x daripada Y untuk sesuatu tahun.

Apa guna nya kita tahu income negeri Pahang? Kerana dengan mengetahui pendapatan negeri secara membandingkan rekod, dapatlah kita tahu sama ada kesihatan ekonomi negeri di urus dengan baik. Apabila kita tahu perkara ini, boleh lah kita berdebat dengan rasional. Saya kira MB pun akan suka jika kita berdebat dengan penghujjahan yang rasional dan tidak terpekik terlolong menuduh sembarangan atau memberi sokongan babi buta.

Seperti biasa bajet negeri Pahang berada dalam keadaan defisit. Tahun hadpan RM98m. Erti nya, hasil kita kurang dari belanja. Kita belanja lebih dari pendapatan. Bagaimana kita menampung nya? Dengan berhutang dari kerajaan persekutuan.

Sahabat sahabat saya dalam dewan Pahang akan berkata- ah, bukan Pahang sahaja yang defisit. Malaysia pun defisit. Susah lah kita mahu memulakan perdebatan jika kita mempunyai sikap yang sebegini. Tapi mungkin kita boleh bandingkan peratusan defisit negei Pahang daripada Income negeri dengan peratusan defisit per Income negeri negeri lain, YB? Entah2 peratusan defisit daripada Pendapatan Negeri kita jauh lebih besar, tidak?

Kenalah kita menerangkan, mengapa kita kata defisit tidak usah di gusarkan. Janganlah kita mempertahankan defisit dengan menyatakan ianya terjadi sebab kita belanja keatas welfare. Kita tolong orang miskin dan susah. Sememangnya, tolong orang susah dan miskin adalah suatu perkara yang murni. Tapi mustahil, bahagian yang di salurkan kepada orang miskin dan susah, menyebabkan defisit? Tapi point inilah yang akan di gunakan oleh sebahagian besar dari wakil rakyat kita.

Jika kita hanya tahu point seperti ini, nampak sangatlah kita tidak menghalusi ucapan bajet MB dan bila balik ke hotel hujung mingu, tidak mahu menganalisa inti bajet dengan rapi. Kalau kita beri hujjah yang dangkal, maka pengamal media baru seperti Sakmongkol akan memberi pandangan nya. Dan pandangan nya tidaklah seperti pandangan budak sekolah pemberita dari Utusan Malaysia yang disebut orang sebagai akhbar yang terbodoh dalam dunia!

Seperkara yang kita harus sedar ialah, defisit tidak semestinya sesuatu yang tidak baik. Ia jadi tidak baik, jika defisit di guna dan terjadi sebab kita beberlanja keatas perbelanjaan mengurus atau consumption spending. Yakni, kos mengurus naik tapi prodaktiviti tidak naik sama.

Jika defisit terjadi kerana sebab ini rakyat sema akan bertanya- mengapa kos pengurusan naik, tapi kualiti perkhidmatan tidak? Bila kita pergi ke pejabat kerajaan, pegawai keajaan tidak ada di pejabat. Mereka minum teh atau pergi main golf. Ini bukan syarikat bapak mereka punya. Kadang kadang, kita di layan dengan kasar dan secara insensitif sekali. Orang yang datang berurusan dengan pejabat kerajaan di layan seolah olah seperti peminta sedekah yang bergantung kepada ehsan pegawai.

Tentlah ini menjengkilkan perasaan rakyat jelata.



Friday 13 November 2009

The Parallel Economy: The Point


A few days back I wrote a short essay entitled the parallel economy. There was one comment I didn't publish which asked- what's your point?

I did not publish it not on account of reasons which I normally reserved for inane and idiotic outpouring of words masquerading as furthering the cause of UMNO( blog readers know these buggers!). I didn't because; I want to publish an extended reply on my part.

Finally I received a comment from a perceptive reader:-

Your point on the "parallel economy" is well taken though not many seemed have caught this.

the chinese have in fact been running a parallel economy for a long time since they have their institutions for funding etc. the bureacracy is tolerated and money is used to buy or smoothen the business processes and asset holdings. In the the Ali -Baba style of business practices under the old 30% Bumi equity suited them well and they exploited it to the full. So whats new? The tax payers money has also gone to fund Chinese development since the govt funds Chinese schools even though they do not need any funding, given their capacity to raise funds from their community.

The parallel economy is so well entrenched that it is one of the major "blocks" to nation building. the problem is exacerbated by the Govt's denial of this issue since the BN style of govt is along racial lines. the only way to resolve this matter is not allow political parties along racila lines and only allow political parties which have a national agenda and a national mix. How else to integrate?

13 November 2009 12:22

This is my point. We are operating at cross purposes and yet we are talking about 1Malaysia and all that jazz. We are talking about uplifting Malay economics and closing the wealth gap, yet we fail to learn the lessons from the parallel economy. De-regulation and challenging the mindset is the way to go.

My point is that because OF the parallel economy, the takeover of businesses owned by such corporate titans like Robert Kuok is a non issue for the Chinese at large. As long as they can carry on with their 2,3 or 4 nombor ekor, can still manufacture and sell pirated DVDs and the typical Ah Beng in the comical advert can still run, as long as people behind Shun Li can get to rent out its premises to UITM, Plaza Prima, Saville or Elken Convention centre can carry on- that's all right. The Malay political chieftains can take over these tips of the economic icebergs as long as they don't touch the fundamental parallel economy. That's where the survival of the Chinese lies.

By making loud noises about such takeovers, that will apply some restraining force on overzealous Malay bureaucrats. At the end of the day, the objective of protecting the parallel economy is achieved.

In the meantime, I am thinking how to refute the assumption that the parallel economy is a stumbling block to nation building and the commentator's belief that the way to resolve (blockages to nation building) is to disallow race based political parties.


DUN Pahang: B-day.

Yes, once again its Budget day for DUN Pahang.

The Pahang state assembly sits for its annual budget sitting. The MB will present his case to appropriate a certain sum of money to spend in 2010. I haven't seen the speech but can make a guess as to the content.

As usual, next year's budget will be a deficit budget. So that our ADUNs know, deficit budget means we spend more than what we earned. Probably, the government income for Pahang this year is around RM600-700 million. Those came from tax revenues on land, quit rents, tax revenue from timber, a little from mining, dividends from its GLCs if any and so forth. Not enough but not to worry says the MB. The country and state will never go bankrupt.

Government revenue represents that portion of the state's income that was collected through taxes, dividends on investments and interests on deposits, taxes and royalties from timber and agriculture. I never had the chance before to ask, what is the state's gross domestic product? - I.e. the value of all services and goods produced by the state. Rising or decreasing?

It's important for ADUNs to know because then, they can analyse the economic health of the state. Comparing the state's GDP can throw some light whether the government has managed the state well. We can then know what proportion of that GDP has the government managed to collect as revenue=income for the previous year. For example RM700 million revenue on a turnover of how much?

Then we can start asking intelligent questions. Suppose in 2009, G's income was lower than in 2008, why was that? Maybe because some district office failed to collect revenues within the prescribed time? Maybe because there has been extensive leakages in the collection of revenues? I hope some bright ADUN will ask this question this year. Tolong kasi tahu sama kita. Berapa besar pendapatan negeri Pahang? ( bukan hasil kerajaan)

What has contributed to the state's ups and downs? Theft for example? Daylight robbery? For example, I am very much agitated to ask, what are the losses of timber revenue from the state? Last two weeks for example, we read reports that thieves stole 3000 tons of timber from an area somewhere in Rompin. I asked a friend- hello taikor- ini 3000 ton, bulapa lama lu boleh kasi keluar? He answered; it may take up to 2-3 months depending on the terrain and machinery you are using. This means, the theft of 3000 tons to timber isn't a task that takes 2-3 days! It takes an extended time sufficient for detection if the people in the forest department are not sleeping. Sure we cannot catch the people behind the eco heist- but there is a direct route to catch them. Arrest the state forest officer, arrest the DFO and arrest the rangers- make them sing like canaries and you will surely discover the hidden hands.

So, if I were still an ADUN, I shall ask, tolong beritahu saya, berapa nilai kecucian balak sejak 5 tahun kebelakang ini? I am sure the state SFO will be shitting in his pants.
( no spelling mistake there- i mean cuci bersih. nilai cuci bersih kita punya hutan).

To be continued….


Thursday 12 November 2009

IJN: Privatisation and Taking It Private-2

IJN was established in 1992. Its main shareholders were/are Ministry of Finance and Federal Commissioner of Lands. MOH? Nothing as IJN was and is operationally independent from MOH. MOH probably 'supervises' from afar ensuring IJN remains on course. MOH directs patients to IJN and this is reflected by the fact that 80-85% of the patients that go to IJN are referred there and paid for the government. Some patients are paid for by the Yayasan IJN such as in the case of the late Professor Hashim Ali.

Since 1992 to 2008, more that 1.5 million patients were attended to by IJN. IJN performed more than 34,000 heart surgeries and more than 87,000 interventional procedures. These facts were presented to the briefing to the PM recently.

Probably like, me, when they heard these for the first time, they were in jaw dropping awe- some of the terms they used such as interventional cardiac procedures, CABG, Cardiac Catherisation Complications- phew! What are these? PCI mortality and so forth. Ah so, I found out later that the fierce sounding CABG is open heart surgery and PCI Mortality is death arising from non invasive heart surgery. My devious economist logic quickly retorts by saying of course your PCI mortality in 2007 was 0.1% compared to Mayo which had 0.76%. This tells us nothing because you don't cut people up and so the risks of death resulting from not being cut up are therefore low. More deaths occurred at Mayo (a hint of gloating maybe from IJN doctors?) were perhaps due to the patients going for PCI to Mayo were almost gone cases. In the words of a commentator- nyawa nyawa ikan cases.

But imagine the horrified faces of some of the officers at that meeting- yes those krepek eating senior treasury officers trained maybe in reading hikayats at UM or UKM previously- they can be starry eyed. They will say the sensuous ahhh..oohhhs and so on.

The presenters claimed that they trained doctors from HUSN and HUKM. A friend contacted me to say- there was nothing of that sort. Doctors from HUKM and HUSN came to perform operations at IJN using facilities at IJN and not to be trained. Unless of course, a brief sojourn at IJN is considered a new definition of training.

The cruncher at the presentation came when the slide 'FOR IJN TO CONTINUE AS THE PREMIER HEART CENTRE AND BE AT THE FRONTIER- wow what a mouthful!

At the top of the list of preconditions is a statement that is quite shocking to me for it said, to achieve the above IJN must be clinician–led organization and continue offering attractive - remuneration packages. So its always money money money, always honey.

Here was the real reason. The doctors want control of the turf. They want everything. They want good remuneration packages. So I went to snoop around and asked how much on average the 33 doctors earn monthly? The answer is at the very minimum RM 80k per month. Wah! That much while those macai doctors who do the skunk work earn a relatively paltry amount of RM8k. these specialists , I asked, what do they do? Mostly, when operations were carried out, they stand watch and instruct and probably just to show handwork, maybe do the stitching. Or maybe in the case of a particular doctor, took over the tasks normally done by senior nurses in taking personal care of Tun Dr Mahathir the last time. Mahu nama beb…as a blogger friend would say in his trademark slang. Come on beb- light my fire!

Of course they want the government to support them by sending more patients. If possible all patients so that they get paid more. For funding and research? They want money from uncle G, the Boss.

So you have a group of people wanting to tae IJN into their private hands but insisting that costs be socialized.

From my last post on IJN, I got this comment below. It appears to be a comment from one of the 33 senior doctors. His/her comments deserve a wider audience and so I reproduced it here in its entirety. Hope to write another installment on IJN soon.

Anonymous said...

1. After reading your latest post I have to admit that NOT ALL OF US is in sync with what our CEO put forth to the EC. Somehow I suspect you already knew that!

2. I know what I am about to say or write, might put me at loggerheads with the other 'side'. But all this public bickering must ceased as its hurting the morale of the entire staff of IJN which will ultimately makes all our good efforts thus far to a nought. IJN is an INSTITUTION set-up by the Rakyat for the Rakyat. And it must be defended at all cost!

3. We have lived under a medically trained CEO for the first 12 years since IJN's inception in 1992. We have reached a plateau in terms of progress as the CEO then was a 'part-time' as he/she was still expected to see through their patients.

4. Internal bickering among doctors then was rife & to certain extense bordering madness. As one commentator put it correctly, the CEO's during that period was 'emotionally tortured' by our more aggressive colleagues pushing through the doctor's agenda which is always 'Doctor's First'.

5. Then came a period of calmness when the shareholders decided to put in place a non-medical CEO. The CEO basically clean up the house, tightened the screws where its needed and makes us all toe the line. Its all fine with some but not to others.

6. We were all rewarded accordingly and all seems fine at first. But as the numbers starts to improved, so is the expectation of the others. It seems nothing is enough.

7. This latest episode, sadly to say, is the culmination of such expectation. We are aware of a meeting between one of our colleague with a blogger whereby a supposedly private & confidential information was passed on to this blogger. Unfortunately for them, but fortunately for us, some people just couldn't keep their mouth shut.

8. In the EY report date the 13th October, there's no mentioned anywhere in the documents of any privatisation proposal or sell-off or canniballising of subsidiary companies. It merely outline the current organisation structure & ways to strengthened it to meet future challenges. That's all to it!

9. But, why was it distorted in the manner it was published on that Monday that is beyond comprehension. We couldn't understand it then & even now. Was there a hidden agenda by this group? What's the end game? Maybe to create strong public sentiments against any form of 'privatisation' or 'wide-spread asset unbundling'. We are just doctors!

10. Somewhere along the line, we have lost our objectivity. I can deny that the financial rewards is there & I'll be a hypocrite to say we don't want to be rewarded. And we don't need to re-invent the wheel just to achieve our financial goals.

11. Our objective is the patients. During those glorious days when a doctor is just a doctor, when we used to do everything ourselves, patient comes first. Sadly to say, I see some of my colleagues is pushing everything to the junior team member. Getting appointment to see us is still a major issue. We tried our best to fulfill our patients' need but to be perfectly honest, we are short handed.

12. IJN must re-chart its course. But not the way our CEO is doing it. They think by reverting to the single structure things will be better than the current one. I see no flaws in the current structure & can understand why it's being done this way. I sincerely hope my other colleagues can see it too. But it has got to be seen without any hatred, revenge and only with a clear mind.

13. I do not wish to be known as I know the kind of treatment I will received from my colleagues. All tjese years, my colleagues and me, managed to keep our sanity by staying at the sideline. And we will remain there for as long as it takes.

One of the 33 BUT not the 13

12 November 2009 01:26


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