An afternoon with The Oracle of Syed Putera-Part 3

Part 3.

The Oracle continued:-

So, we focus on the economy. Don't create Achilles Heels. You want people to fight on the beaches, in the landing areas, in the streets, fields and hills? Get the professional soldiers. Give them the tools and stand aside. Let them finish their job.

The leader of this country should look at two things; very essential and fundamental, I think.

First he needs to look at the toll tariffs.

Two, look at electricity.

I just heard, electricity tariffs are going to be increased. People will get frustrated. The cost of coal is unbelievably high. We are buying at what? USD90 per ton? Furthermore, you are buying at Spot Prices. It's more sensible if you do a term contract- forward buying.

A group of Malay boys came to see me. They have a solution they say. I find it encouraging and very interesting to see our Malay boys doing this. Years ago, no one can imagine Malay boys coming out with such a practical idea. I think the idea has got merits.

What's the idea, O Oracle?

Build stockpiles. We buy coal and have them stockpiled. You have one stockpile in Pahang, one in Selangor and one in the south. Maybe another one in the north. The boys tell me, they can buy the coal and sell it to the government at around USD60 per ton. Do a little bit of Hedging.

We can imagine not only cost savings for TNB but also profit estimates. Research by the firm Macquarie for example, estimates that for every US$1 per tonne reduction in coal prices would add 1% to TNB's profit estimates.

Imagine that. You get to save USD20-30 per ton. Multiply that with the total tonnage consumed.

But I am told the idea is not received favourably. The TNB CEO should look into this idea. You operate on the spot market, and you confine the tendering to 2 or 3 suppliers- people are bound to ask questions. Because the price of the lowest tenderer is still above the average market price. I think the idea of having stockpiles is a good one deserving of a try. Save money. People get to buy electricity tariffs at acceptable level.

Managing the economy becomes more difficult if you have your own people working at cross purposes. Example: the proposal by a company to take over PLUS toll concessions. It would have meant reduction of toll rates by 20% which the people will see as popular. It will mean we have RM50billion into the system. For God sake- we don't have the money. We should be thinking of raising money this way instead of groping in the dark.

How much do you get from GST? RM 1 billion? In principle, I am not against GST.

Yet you have someone from the government saying that it will cost over 200 billion to take over. Each year, the government is paying billions in subsidies. We should get out from this quicksand. Get the private sector to do this.   Generally, Government must not do business.

I was itching to ask this question. O Oracle- how do you see the government selling down stakes in the GLCs. The ones Khazanah is handling?

The leader of this country must set his priorities right.  We should be paying attention to what Khazanah is doing.  Khazanah was formed to invest in strategic industries.  Why the selling down in the first place? I heard it was all just a strategy to sell government businesses by some people uncertain about their future. There were these rumours you see- at one time, the CEO of Khazanah wasn't sure of his tenure. Probably he wanted some golden handshakes. Maybe his guys thought about the idea of selling down. Not sure whether this idea will be implemented now that his tenure has been extended.

It's time to look at Khazanah. For example why is the minister in charge of the EPU still a board member? It should be the Finance Minister 2. You must let go. Then again, look at the position of the Finance Minister himself. Maybe no longer suitable to be the chairman because it can give rise to the possibility of conflict of interests. What if as Finance Minister, he needs to implement policies not palatable to Khazanah? He is there. Yet he must implement policies of the government. Worrisome isn't it?

Khazanah selling down has become a sort of priority. We are reacting to foreign pressures. Some people from abroad, tell you- you need to trim down because of this and this- what do you do? 

You react as though what they say as gospel truth. This is certainly not the way. You do something because it is right.  Khazanah can't think for themselves?   These executives are highly paid.  Foreigners direct Khazanah?  What did they do with Proton's Augusta  and Pantai?

Some industries and holdings must be in government's hands for strategic interest. Most countries practise this.The same with strategic assets.   Just because some people from abroad come here and tell you this is wrong (an assumption not tested) we responded in a knee jerk manner. Slow down, think before we do anything.

Take the case of Land for example. What's the extent of land in Kuala Lumpur that is still owned by Government? The government is doing something very fundamentally wrong.

Just look outside. You see Mid Valley which used to be what? Kampong Abdullah Hukum. I bet many in KL don't even know who he was.  Many people now  don't even know that a Malay Kampong known as Abdullah Hukum ever existed. Yet you are tendering out these strategic lands. If you tender! What do you get? Maybe one miserable building owned by Bandaraya. Do a case study on Mid Valley, Sentral and 16 acres of land at Brickfields given to UDA.  Government seems not bothered. 
What about land banks of Tenaga and TM?  You check.  These companies are part of Khazanah.  What is their contribution to NEP strategy?   The classic case is railways.  Year in and year out, slow losses.  What did they do with their premium lands at Kenny Hill and Sentul?  Compare that to Indian Railways.

I am not saying don't sell the land because the land is owned by Government. But we could have kept the land as a contingency measure should we face economic crises. When we do, we have land- valuable land and maybe we can get better return. These land parcels are mostly located in prime areas.

The government is doing the same to the land around Jalan Imbi. You know the area where there were government quarters. This is not a good way of dealing with valuable assets.

What the government should do is to draw up a master plan over the land. Then sell the land together with the master plan. It becomes a package. It shows the government has put much thought into the strategy. In that way, you not only get to sell at better value, you also get to manage what's going to be developed there. Maybe you can even tailor the development there in accordance to a wider vision.

About this Khazanah selling down. Who do they sell the interests to? Most likely to the same players. Will they be managed properly?

Anyway, like I said just now, let's prioritize. Why is the PM more in interested in chairing meetings of Khazanah. The value of its portfolio is nothing compared to PETRONAS. Yet the PM seems uncomfortable to deal with PETRONAS. We are surviving about half on PETRONAS's contributions. We should be directing our energy and ideas at PETRONAS. More so now as its Profits are almost reduced to half from usual. That's worrying too.

You want to restructure PETRONAS? What do you want to do with the present CEO/President? Make him the chairman. He has been in the industry for donkey years. He knows the ins and outs. He can still frustrate you through his network of workers. So, if you want to restructure PETRONAS, make a clean break. Find a new person altogether. Or don't change anything at all.

There was the idea being floated- put Syed Hamid as chairman? Why? He can't possibly overwhelm Hassan Merican. Oh—because he was promised that job by the previous PM? If he is good, he won't have problems finding rewarding careers elsewhere.

Oracle sir, I have been meaning to ask you this. What do you make of the new economic model?

I myself am not totally clear what the government means about the new economy. What economic model do they mean?

But luckily I am very fortunate to know Tun Daim Zainudin.if there is anyone who should be able to tell a thing or two about what the new economy is all about, it is Tun Daim.

Ah ha, I was thinking. The Oracle knows Tun Daim personally. Things will get more interesting. Can't wait to know of juicy tales in the Temple.

Do you know Tun Daim, O Oracle?

I do. We came from the same state. Same town in fact. Went to school with the man. Played football together. I know practically all the members of his family.

I am sure you remember he was our Finance Minister. A man with a few words. Always with a serious demeanour. I have known Tun Daim for a very long time. You can practically say, all my life.

Tun Daim narrated an interesting story to me. His Majesty our King asked Tun Daim one day, what's this new economic model all about? What do we mean by going up the value added ladder?

What did Tun Daim tell you, O Oracle?

The Oracle continued.

Well, this was what Tun Daim told me. The new economic model means we are going to build our prosperity on new industries. For example industries which are knowledge- based, service based, emerging technologies such as biotechnology for example and all that.

How perceptive of Tun Daim, I said.

Most certainly. My firend Tun Daim has his ears close to the ground. Of course I, being his lifelong friend was able to share in the insights of this remarkable man. I won't be surprised if he has investments in such industries.

On the other hand, the shift into the next economy requires serious planning. Our leaders must be knowledgeable. Read up on the subjects. I am appalled at the shallowness of some senior ministers. One needs to speak with authority. And convincingly so. Dr Mahathir had those qualities. He knows what he is talking about.

Hence when the government says about the new economy isn't going to be a straight forward matter after all. We can proclaim agendas, programs etc. but we need to determine what directions economically do we take?  What do we do to reduce our dependence on natural resources?

Just look, PETRONAS has suffered reduction of its profits recently. The cost of explorations is not going to be  any cheaper. That alone should heighten our sense of urgency. I find this sorely lacking in the minds of our leaders.

We pride ourselves on palm oil. Have we looked at our productivity lately? FELDA has large acreage under Palm Oil in Sabah and Sarawak. But the productivity, people tell me is very low. Yet no one in FELDA seems to care.

Why is FELDA straying away from its core business? It has long departed from the agenda and vision set about by Tun Razak.  We read, now it has hotels and resorts all over the place, restaurants in far flung places. You stretch your resources on unrelated portfolios. You are going to get your fingers burnt.

Eager to contribute to the discussion, I offered my thoughts. If we are going to move up the value added ladder, we should concentrate on our areas where we have comparative advantage. Maybe services. We Malays are good in service industry. The knowledge based and IT businesses. These are the new frontiers, I think, O Oracle.

They are. But let me say something in which Malays can excel. The arts are an obvious example. You want to an actor? An actress? Be the best in the field. Cultivate yourself with the required skill sets. Be professional. Look at those Bollywood actors and actresses. They are making money. We have had one superstar- P. Ramlee; he could have become a super millionaire in today's terms.

You want to paint? Be the best artist. Be the best in your field. Invest in yourself. Point is, you have to be the best in the field where you have comparative and competitive advantage. Let's face it- we can't be the best in all fields. The Chinese- they excel in certain fields because they work hard at being the best there. We shouldn't t envy them for that.

Of course, IT and knowledge based industries are the future. But how do we handle that? We certainly can't do it by following misguided policies. Let me give you an example. We have produced many thousands of Malay graduates. Yet the number of unemployed graduates is biggest among Malay. Why?

Ok maybe, they face natural barriers of entry into certain areas. We know that. But probably the more important cause is our misguided policies on education. We wanted to produce Malay graduates of any kind. We ignored the requirements of industry. We produce square pegs for round holes. There is widespread misfit between industry requirements and skills we have.

We must have critical mass to make that leap into the next level. Right now, we are not doing well in that area. Industries are moving out. From here to the Philippines. Even to Vietnam where they are multilingual you know. They can pick up English and they can speak French too.

We don't build capacity, investments will fly. FDI is decreasing. We need to arrest this downward trending. We must go out. Bring investments in. DR Mahathir travelled extensively. Selling the virtues of Malaysia. We don't seem to repeat the enthusiasm.

Let's look at the contents of education. What subjects do we stress? We want to go to the next step? Into IT industry? We need to have trained technicians and engineers. How many engineers does India/China produce yearly? We don't do that.

Realistically, our desire to move into this kind of industry is a long term program. Restructure the education industry with emphasis and priority in new emerging fields. Train the Malays in that industry. Then, they can make the leap from traditional to ultra modern economy.

The better bet is move to biotechnology. Because this is where we have some comparative and competitive advantage. We have biodiversity that cannot be replicated by other countries. The government should be looking here. The Pharmaceutical industry can be leveraged on our biodiversity. On our flora and fauna.

Right now, we are in a catch 22 situation. We haven't built the critical mass of human resource that will allow us to leap easily into the new economy. Second, we don't have the absorptive capacity. Even Malay graduates are migrating elsewhere where there are markets for their skills.

O Wise Oracle. I was thinking… We have a few good GLCs. In media and communications for example. But I am puzzled as to why they don't go the full 9 yards. For example, TV3 the last time. Why didn't they think to have a second ASTRO for example? You get to beam in serious content into the homes of millions. Look at the current ASTRO. They have so many Tamil content which we can't begrudge because that business is owned by a Sri Lankan of Tamil roots.

Certainly they should. Maybe it has something to do with the quality of management. I am not sure. Generally speaking, if you have civil service mentality running businesses, you probably can't match the private sector mentality. Definitely, they need to push themselves to the limit. The whole 9 yards as you say.

Take a look at the broadband services. Our companies such as TM can do better for example. Now I hear the Chief Sri Lankan mega Tycoon wants to do the Last Mile broadband hook-up. He most certainly is capable of doing it. If he does it, TM should create another Astro.

I am thinking, The Oracle has been talking for a long time on economic issues. I fear the session may end soon. I was eager to move on to other issues. Normally the Oracle would grant 45 minute sessions. Our conversation has by now extended beyond one hour. I don't want to overstay the Oracle's hospitality either.

Can we talk about political issues please O Oracle?  How do you think should UMNO treat its former Presidents? In particular how do you think should we treat the larger that life figure of Dr Mahathir? I have even characterized Tun Mahathir as the Man who can walk on water.

That will be in Part 4, I am afraid.