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Sakmongkol ak 47

Saturday 4 April 2020

The Economic Transformation of Malaysia: Part 1

This article is divided in 3 parts: Part 1 is what I believe is the sine qua non for economic transformation. Part 2 is an evaluation of previous economic polices, and finally Part 3 is the economic transformation of the rural economy.

First, Muhyidin must be a pragmatic leader, using common sense instead of theorising and philosophying. Don't be shackled by the theories of Samuelson or Friedman. Use practical and common sense. Does this policy work here?

Don't be a goody-two-shoes leader. I was aghast when a person suggested that we celebrate differences in opinion and it was suggested that we give air time to the opposition. It's not the business of this government to allow the opposition to undermine  us. Being practical means not to be caught by these airy-fairy ideas of democracy.

Being practical also means to quickly get rid of nincompoops  in  the cabinet. For instance, it was laughable to hear the new Health Minister suggest that we drink a lot of warm water to combat Covid-19. What a bozo! 

Unless of course Imperial Muhyiddin wants a court jester in his cabinet and entertain his dour existence! 

Being pragmatic also means Muhyiddin must be prepared to take unpopular measures and not be unduly concerned with ratings. If he is, then he is blowing with the wind and playing the gallery, eager to please everybody.

The PM has just announced a slew of charitable measures. They are both good and bad. 

Don't get me wrong; charitable and gratuitous money is good for the very poor infirmed sick and the economically depressed, but in  the long run is not good for the able bodied and the economic pupae soon to become butterflies.

To able bodied people, FELDA settlers, and the self employed, Laffer's Backward Supply Curve and Muth's Rational Expectations will operate.

I am talking as an economist here; the able bodied will work less and expect gratuitous economic handouts from the government. Responsibility to oneself becomes the responsibility of the government. This is not good if our intention is to create rugged individuals who roll with the punches.

The lesson for Muhyiddin here is be discriminate in his charity. I remember Najib once told me there is nothing the Malays like (he was talking about some Pekan Malays) than to get free things.

The PM must be supported by an efficient civil service. The undisputed fact is a good government requires good people.

To attract the best, we must have competitive remuneration. The salary of ministers in Singapore for instance is tied with the top 5 private sector salaries. Not only does it attracts the best, it can also discourage corruption.

I am not at all impressed by the fact we have 1.6 million civil servants if the majority consists of grade "C" eggs. 

I once gave a talk (with others) to cadets of Singapore's civil service, consisting of their brightest. I asked, the convenor herself a Cambridge graduate, "Do you take in 1st-class graduates only?" "No," she answered as a matter of factly, "2nd upper- and above." I kept quite in acceptance. That confirmed the quality of civil service needed. Having a high quality civil service means we don't have to explain  many times to make them understand. They will understand much faster. 

But having a quality civil service is not a happenstance, it does not happen willy nilly. We must assiduously cultivate it. Must consciously plan for it. I do not want the government to become an employer of last resort, attracting the riff-raff. It is time to restructure our civil service, military and police to reflect our racial composition. If non-Malays are good, we take them in.

The PM needs to control and reduce corruption. In his bid to be everything to everybody, he must not be forgiving. It is a travesty of justice if we overlook the massive corruption done by the David Duke of UMNO rednecks, the billion dollar whale Najib Razak. He must face the law. All forms of corruption, commission must not be tolerated by the PM.

The PM must promote meritocracy. This can be achieved through competition.

But how do you choose people? I used to work for Shell -- they have an appraisal system called HAIR. Kuan Yew also used this. This is a method which we can begin. It stands for Helicopter  vision, Analytical power, Imagination and Realistic. Can the person see the big picture? Can they analyise problems? Is the person imaginative? Think outsidse the box at times? And is the person realistic?

Is giving all and sundry RM1000 to RM3000 realistic? What are the consequences? Will Auntie Kiah be jumping with joy as a result of receiving RM4000, forgetting that her sarong has slipped? Or will she be sulking because Muhyiddin like Bosku Najib before  him had also lied?

Take heed of a Laffer's Backward Supply Curve and Lucas' Rational Expectations. Is Muhyiddin's RM250 billion package capable of producing a temporary financial placebo effect?

Has anyone heard of Manzhouli? It's a city in China near the Russian border. There, the Chinese built a Russian town, complete with Russian architecture, buildings, restaurants, a large inland port etc. Russian immigrants bring their ballet, trade values, their industriousness etc. It is not an uncommon sight to see people queuing up to buy bread. China exports fruits and vegetables to Russia. Manzhouli has turned into an economic and a social hub. The Chinese and Russians learn from one another. The Chinese has pushed the IDEA of learning from others to the extreme. I think learning from others should be part of our economic policy.

We can do similar things in Malaysia. We should forget about the Look East policy for the moment. It's not directly profitable to us. 

We can do an Indonesia town here. I and others have pushed the idea of building a bridge from Dumai to Malacca. So Malacca is the best candidate for an Indonesia Town. The Indonesians can bring their cuisine, culture, values, and industry to Malaysia. We can gain access to its huge market. Don't think Indonesia as a source of maids only. Learn from them.

These are the factors we require. First of all, to launch an economic transformation of Malaysia. We proceed from first principles. Muhyiddin must remember he cannot please everyone.


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