The PPSMI Issue

The market will punish us. Accordingly I find it difficult to support the government's decision to revert teaching science and maths in Bahasa Melayu.

I was talking to two serving ADUNs from Pahang. They are from MCA. Both are university graduates. One of the issues we talked about is the teaching and learning of science and maths in English. In Malay it is called PPSMI. I told them, the subjects will be taught in Malay again. Mana boleh they said. It must be retained as of now. As of now, means, they are taught in English.

These are Malaysian Chinese speaking on the subject. I know both went through primary Chinese schools. I don't think their loyalty to whatever Chinese cultural cause is lesser than those who espoused the same vehemently. Yet, they regard a reversal to the teaching of the two subjects in Malay disturbing and ominous.

I do not think it is the teaching in Malay per se that bothers them. The Chinese seem to have been very adaptive to their social environment. Even when the medium of instruction has become almost entirely in Bahasa Melayu, it has not stopped the Chinese students from doing very well. Some even scored better in Bahasa Melayu than Malay students.

What borders them is the economics of mastering a language that allows the Chinese boys to compete will be taken away. Mastery over the universal language of commerce opens more doors for students. They understood the economics of learning English. The Chinese have benefited from learning English. Multinationals prefer domiciling in countries where the standard of English is high. It follows therefore that, a country with a workforce with a high standard of English language is preferred. The Chinese don't want to lose out economically. Mastering the English language places the students on a higher premium.

What is the significance of the success in making the government switch to Malay? The medium of instruction in all national schools is in Bahasa Melayu. Except of course you can't teach English in Bahasa Melayu. Even here, I hear there are demands that the English novels and reading material that are used to teach should be ones written by local authors. Would Tash Aw's Map of the Invisible World qualify?

I find the rationale that the teaching of these two subjects finally establishes the sovereignty of the Malay Language suspect and must never be allowed to pass un-debated. If that is the rationale then why do you allow the teaching of these two subjects in vernacular schools be carried out in the respective mother tongues? Di mana then is the martabat bahasa Melayu? You still have a situation, that Bahasa Melayu is not universally applied in Malaysia. That means, you still have not achieved full majesty stature of the language. You are still burdened with the accusation, that martabat bahasa Melayu masih di pertikai. Samad Said should be jumping here.

Suppose down the road, in 5 years time, when everyone who are made to go though the language regime have completed their lessons, we find those who have studied the subjects in the Chinese and Tamil Language doing better that those who studied them in the Malay Language. What then? What happens if in the national schools, non Malay students having been forced to study the subjects in Malay, do better than Malay students?

Would we then admit, that insisting Malay language be placed on its sovereignty pedestal has been accomplished on the blood and tears of Malay parents.

We are also offered as a reason, that this current policy will be a step to correct the imbalance between rural and urban school children. Rural children are said to perform badly in maths and science when they are taught in English. Urban school children do better. The urban children do better because they have better facilities, better teachers, and tuition opportunities. These should be made more readily available to rural children. Post better teachers there if the deficiency in English language is the main cause for their poorer performance.

The logical inference then is if these subjects are taught in the common Malay language, the performance of the rural children will be better? We seem to accept the achievement of rural children as the gold standard by which all children must converge upon. I find this reasoning faulty. If anything, we should be taking steps to elevate the standards of rural children to the higher standard of urban children. The higher standard of urban children is the standard that we must work to arrive at. Tuan tuan dan saudara saudara- we want to share in higher standards not share lower standards. We are thinking like socialists- sharing misery is better than sharing prosperity.

We are not told of the rural students' achievements in other subjects which are taught in Malay. If rural performance (Pr) is <Pu, where Pr is rural performance and Pu is urban performance, what are we to make of that? If Pr is indeed inferior to Pu in subjects other than maths and science, then it strengthens our argument that the poor performance is caused not by poor mastery in English but inferior quality of facilities. Perhaps it is also accounted for by poor parental support, low value attached to education and so forth. The physical and psychological support system in rural areas are inferior to that in urban areas. It is to these things that we should direct our efforts at and not look for English language as scapegoat.

We have the curious and debilitating consequence of having won the language battles; our own students lost the war. You hear people like Firdaus Abdullah( the UM Lecturer) extolling the virtue of the Malay language- I don't understand what he is talking about in the Malay Language. He goes to international symposiums, I doubt he converses or interact in the Malay language except when going to Indonesia.

Hence we come to the real rationale of the language nationalist. The motive is to ensure Bahasa Melayu is ennobled. Kita mesti memartabatkan bahasa Melayu. Of course we must tuan tuan dan saudara saudara. By making bahasa Melayu the medium of instruction-mandatory in government aided schools, we have finally succeeded in absolutely owning something. Malay language is owned by the Malay and it is in this, that Malay ownership is absolute. In all other areas, Malay hegemony is a myth.

Jadi the rationale is nothing more than to superimpose the last remaining pure Malay thing onto all of us.

How will the market react?

In the longer run, this policy will guarantee Malay students remain in a limited market. Those who overcome this limitation by somehow mastering the English language will operate in a wider market. The difference between the Malay and Chinese boils down to this. The Chinese sees the world as their oyster while the Malay sees only Malaysia as their oyster.

One of the strong supporters of this reversion is the distinguished professor Ungku Aziz. Now, Ungku Aziz is a heavyweight intellectual who often laments about thinking deficiency among Malays. One of the incapacitating quality of the Malay, according to Ungku Aziz, is they don't know how to think. Perhaps we can use his observation to elaborate on the differences in thinking between Malay and Chinese.

The Malay appears lost when it comes to thinking dynamically. This involves thinking ahead, thinking again and thinking across to make one's particular group relevant to the modern world. Thinking ahead involves envisioning future requirements and positioning oneself to stay relevant. In a world where globalisation flattens the world, boundaries are mentally and physically erased; making oneself relevant necessarily involves mastering language and technical skills. The less adaptive becomes less relevant and remain behind because of failure to acknowledge emerging realities. Thinking again involves re-examining current policies and refining them to adapt to changing environments. Thinking across means learning from the example of others on why they have become better performers.

At a very basic operating level, the thinking mode sets the Malay and Chinese apart. The Chinese know how to think dynamically while the Malay does not. The Chinese will work to position himself to be relevant; they will sharpen existing skills and knowledge, sharpen their experience and are open to learning from others.

Was this revisionist policy apolitical?

Whatever TS Muhyidin says- all decisions are political. No decisions which are taken qualify as being politically free. It is political in the sense of any decision taken is a translation of the powers behind. Hence the decision to teach the 2 subjects in Malay, is political in the sense it translates into practice, the possession of governmental powers.

In this case, it translates the power of partisan demand from the language supremacists. This will lead people to the conclusion that the government capitulates to the demands by these groups. It will also be seen as a calculated move to rally votes for the coming Manek Urai by- election. It is also another distancing step from the legacy of Tun Mahathir. It is another step in de-Mahathirisation. That's how political it is.

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Beyond the PM’s approval ratings.

PM Dato Sri Najib is enjoying a 65% approval rating. This was established by way of a poll undertaken by the Merdeka centre for opinion research. The sample size taken was 1060 people. We may assume it is a cross section of the voters in Malaysia.

Not sure whether the people interviewed were people in other states or just the Klang Valley inhabitants. If the survey was undertaken in Pekan, the approval rating could be around 90 over per cent. Hence any outcome and conclusions derivable from such sampling would depend on the location of the population sample. We take it; this was done by professionals befitting a reputable establishment like Merdeka centre. I am sure the sample includes the cafe latte lovers, the bak ku teh crowd, the teh tarik people. It should be reflective of One Malaysia.

When DS Najib was about to take over, his approval rating was in the 40% region. It rose slightly in May and now it is 65%. The rate of increase, 65/42, is phenomenal. In this latest poll, 22% were dissatisfied with his performance while 13% don't care.

The interesting points about the poll to me were the different responses among ethnic groups.

1. Malay 74%
   
2. Chinese 48%
   
3. Indians 74%.
   

The economic profile of the above groups as many of us know are as follows:-

1. Among the 3 races, the Chinese are the best off in terms of economics.
   
2. The Malays and Indians occupy the less better off in terms of economics.
   
3. The average Chinese is richer than the average Malay and Indian.
   

It stands to reason then; DS Najib enjoys wide and popular support from the less well off. The poorer Malays and Indians are more supportive. The obvious policy option then is to better keep the average Malaysian less well off. Doing that however is suicidal. So DS Najib has to go beyond the statistics.

Studying the Chinese response.

It is instructive to explain why the preference among Chinese is less enthusiastic. Has it got anything to do with better economic performance that allows them to acquire a higher political consciousness?

What the above survey shows and perhaps this observation can be used as a generalisation, is this. The Chinese, because of better economic performance enjoys greater freedom of choice. That freedom of choice is associated with a particular economic practice which is free market competitive economic system. The Chinese therefore enjoys real democracy in the sense that their economic independence allows them to exercise a choice which a truer reflection of their thinking.

On the other side, Malay and Indian poll preferences are dictated by their economic standings. They appear to exercise less freedom of choice because they actually enjoy less democracy. Less choice is normally associated with political system that are more restrictive. When you look at the paternalistic politics of UMNO, we can immediately understand that paternalism breeds dependence. When you are dependent on others, you are likely to support him in an unthinking manner.

Suppose the average Malay and Indian like his Chinese brother is better off economically, would the results be as they are now or will he follow the preference choice of the Chinese interviewees?

It is highly improbable to think the PM wants to keep the Malays and Indians in political bondage by disallowing them to become better economic performers. Let us assume that like any other leaders; he wants all Malaysians to advance. Once he accepts this economic trajectory, he will then have to accept the reality that once any group achieves economic advancement, the members of the group can afford a wider freedom of choice. With freedom of choice comes the ability to become free from political bondage. The PM then faces the real possibility that the average Malay and Indian will be less inhibited.

Unless the PM does something to secure their confidence and accordingly their allegiance, economic achievers will be less 'loyal' to him.

The emerging realities faced by the PM therefore are:-

1. All groups will advance economically.
   
2. Economic freedom is associated only with one particular economic system- free market and open competition.
   
3. The outcome of economic freedom will be greater political freedom.
   

The policy implications.

Imagine yourself as the leader of UMNO. The future Malays are all going to advance economically and will unavoidably advocate greater political freedom exercisable through the exercise of flexible choices.

How will UMNO position itself in such a scenario?

One thing that is certain, the UMNO leadership at all levels can no longer apply brute force to convince others. Economically independent groups think and behave differently from oppressed and dependent masses. UMNO leaders will have to operate with different values and beliefs system. Among the notable features will be strategies that appeal to reasoning, rule of law, transparencies, performance, efficiency, honesty and so forth. Browbeating others into acceptance will only invite resistance.

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Farewell the King

Maya Angelou

We had him.

Like the rest of the world, I stayed awake to watch the memorial service for Michael Jackson. We thank his parents for having him and allowing us, the rest of the world to share his genius. To me, the poem by Maya Angelou, read by the singer Queen Latifa was particularly moving. I can do no justice other than reproducing that poem by the great Maya Angelou.

WE HAD HIM.

Beloveds, now we know that we know nothing
Now that our bright and shining star can slip away from our fingertips like a puff of summer wind

Without notice, our dear love can escape our doting embrace
Sing our songs among the stars and walk our dances across the face of the moon

In the instant we learn that Michael is gone we know nothing
No clocks can tell our time and no oceans can rush our tides
With the abrupt absence of our treasure

Though we our many, each of us is achingly alone
Piercingly alone
Only when we confess our confusion can we remember that he was a gift to us and we did have him

He came to us from the Creator, trailing creativity in abundance
Despite the anguish of life he was sheathed in mother love and family love and survived and did not more than that

He thrived with passion and compassion, humour and style
We had him
Whether we knew who he was or did not know, he was ours and we were his
We had him

Beautiful, delighting our eyes
He raked his hat slant over his brow and took a pose on his toes for all of us and we laughed and stomped our feet for him

We were enchanted with his passion because he held nothing
He gave us all he had been given

Today in Tokyo, beneath the Eiffel Tower, in Ghana's Blackstar Square, in Johannesburg, in Pittsburgh, in Birmingham, Alabama and Birmingham England, we are missing Michael Jackson

But we do know that we had him
And we are the world.

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The dismantling of the 30% rule

After PM Dato Sri Najib spoke about dismantling the 30% quota, the reception was mixed. Generally speaking, it is said that the Malays feel naked. There are no longer protection and special privileges that come along with being a Bumiputera. Hence, some feel that Dato Najib by doing so is only attempting to ingratiate himself with non Malays. Perhaps, PM Najib recognised the validity of Lee Kuan Yew's observation, that Malaysia can be better if she treats her non Malay citizens better. Maybe.

The 30% quota was the backbone to the economic policies under the NEP and its successors. It has allowed for the enrichment of selected BUMIPUTERAS namely the well connected and privileged minority. The general improvement for the Malays was secured not through the operation of this 30% rule, but by specific policy initiatives targeted at education, in land distribution or land consolidation (FELDA), through improvements in agriculture which is the main economic preoccupation of the majority of Malays, job mobility and so forth.

There seemed to be two different set of policy initiatives. One which worked through the 30% quota enabled gratuitous transfer or inexpensively financed equity stakes in on-going business firms. The Malay input is required by law to enable the company secure licence, contracts or go for listing. They got the benefits of being who they are NOT because of what they can do.

The other approach was meant for the majority unknowable masses. The policy initiatives outlined above were targeted at capability enhancing. These took the form of raising educational standards, expanding technical knowledge, widening job prospects or transferring productive assets into the hands of those who qualify being given by actually working the land.

The NEP created 2 groups of Malays. The 30% faction turned out to be largely rent seekers. The second group, which took the slower route of progress, were actually the people who actually worked to gain benefits.

The NEP then created two dichotomous groups. One secured benefits by being who and what they are. The other group secured benefits by offering what they can achieve.

The numerically larger capability enhanced group has been outside the 30% game thus far. They lose nothing that which they have not gained. Thus dismantling the 30% quota does not cast a doomed shadow over them. In fact, they stand to benefit from the opening up of the economy since they have been capability enhanced. The ones suffering will be those who have benefited by taking a joy and free ride enjoying the status of Bumiputera.

My own personal view is, the NEP (especially the 30% equity rule) is essentially a giant, legalised PONZI scheme. Consider this. Since the NEP was carried out, in the name of the NEP, in the name of Melayu tak akan hilang di dunia, RM54 billion worth of equity ownership has been given to BUMIPUTERAS. Who were these BUMIPUTERAS? The refined term used presently- the first tier BUMIPUTERAS.

It has created a super rich section of the Malay community. I salute the PM for dismantling this 30% myth of Malay ownership of Malaysia's wealth. If it has not worked, cut our political losses and abandon them. Clearly, the policies have not been functioning well.

Inter ethnic wealth differences are widening. Intra ethnic income differences are worse among the Malays. We can infer many things from the outcome of various economic policies. By and large, the Malay administrative elite have not helped out the majority Malays. The political elite have been feathering their own nests. Just look at the GINI coefficients. The facts speak for themselves. Res ipsa loquitur.

What has happened to the 54B? Our PM has been forthcoming in this- out of that figure only 2B remained. Those BUMIPUTERAS once holding the RM52 billion have left the building. They sold or the softer term- cashed out. This behaviour, as some contend, is perfectly rational. The NEP was designed to help Bumis acquire 30% equity- but the policy, these people claimed, never demanded they retain it. They had it and cashed out. The problems start when the very same people want the opportunities again- for themselves, for their successors.

The NEP failed to produce the two elements essential for sustained wealth creation. These are actual ownership of the businesses and a willingness to defer present gratification. You don't have ownership, when you don't have title to something and the responsibility, your attachment is ephemeral. It's like bloggers who chose to remain anonymous while delivering their vitriolic and personal attacks. They refuse to confer ownership on their writings and therefore attach no conscientious responsibility over them. So they babi here and babi there.

95% of those who received government largesse wanted to exercise immediate gratification- more cars, houses and more wives. They want to drive in Ferraris, Jags, Mercs and Aston Martins.

Who are these selected few? Various euphemistic terms have been given to them- first tier, top tier, perhaps later, maal hijrah
business stars. We know them simply as rent seekers and rent collectors. It was easy for them to jettison their shares because they got it gratis. Easy come, easy go. That is also perfectly rational behaviour.

We have another plain term for them. The bumiputera means just that- putera di depan, bumi dibelakang. These puteras in front- PUTERA BANGSAWAN, PUTERA PIMPINAN UMNO, the genetic elite, the inducted elites and so forth. The rest which forms the majority are left belakang- behind. Just like the oppressed natives spoken about by Franz Fanon, the majority BUMIPUTERAS shout- cracy—cracy—while the elite say it loud and proud- democracy. The elite know what democracy means- the chance to enrich themselves at the expense of the majority herd. Indeed, what the majority were shouting and mimicking were words sounding more like kasi-kasi-kasi (not give) but neuter, neuter. They, the majority have been neutered.

What are the positive effects of the NEP on the Malays? It has been successful in so far as it has created the real basis for wealth creation. These include better education, better job opportunities, improvements in agriculture, better standard of living for Malays. The all round improvements cannot however be attributed to the NEP alone especially the 30% equity rule. Maybe it is the outcome of the exercise in normal government responsibilities. It is the nature of government to provide the framework within which, economic actors act on them. They gained by being active and never passive.

The majority Malays are not going to lose sleep over the abolition of the 30% quota rule.

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State Capitalism

THE RISE OF STATE CAPITALISM: GOVERNMENT-ENGINEERED GROWTH VS. WELL-REGULATED FREE MARKETS.

The recent economic liberalizations recently announced by our PM have invited mixed reactions. Some claimed they have not gone down well with the population. The removal of the 30% equity requirement for companies en route to listing is a contentious issue. Some say, PM Najib wants to be popular. While removing the requirement, the PM has also announced the formation of Ekuinas- essentially a fund manager investing in deserving Bumi companies. (?)

Who are to carry out these economic initiatives announced by the PM? If his pronouncements regarding the downsizing and perhaps winding up some GLCs are taken as clues, then he is entrusting the private sector as principal agents. He believes in the market system. But will they be allowed to operate under a regime of a well regulated free market system? A well regulated system means the institution of the rules of law, transparencies, commitment in ensuring enforceability of contracts and an adoption of a supporting role by the government which are designed to assist rather than impede economic performance.

If he remains consistent, then his economic initiatives run counter against the current conventional economic strategy- that of using state capitalism as transmitters of economic initiatives. In so far as his economic initiatives lead to the emasculation of state capitalism and with it, the weakening of state controls, his policies should be warmly embraced by supporters of a liberal economic system.

In an interview with Milton Friedman, he said: the prime movers of economic prosperity are the private sector. His beliefs in the efficacy of the private sector, liberal economic system, freedom of choice remains unshaken.

Let's see what the PM is up against.

In recent times however, there has been a resurgence of Keynesianism in the form of a revived eminence of government as economic engine. In America it is Congress which provides the USD787 billion stimulus package. In Malaysia, parliament passes the rescue package. The first was the RM7 billion package followed by a second of RM60 billion.

The present world recession and troubled domestic economies make political leaders and policy makers predisposed and naturally inclined to see big government as the sure fire solution to economic ills. There is now a ready acceptance that big government is good. This belief accordingly finds expression in the oft quoted assertions that the way to go is by way of public wealth, public investment, and public enterprise. All of these are creations of big government. as Over the past several years, an era of state capitalism has dawned, one in which governments are again directing huge flows of capital in their economies.

But there is a flipside of state capitalism. It justifies bigger government and with bigger government comes deeper bureaucracies and extensive politics. Indeed, as noted by Ian Bremmer in a recent article in Mckinsey Quaterly, under State capitalism governments can manipulate market outcomes for political purposes. Governments embrace state capitalism because it serves political as well as economic purposes. They enter the market not because it's the most efficient means of generating prosperity. With enlarged governmental role, vast financial resources are placed within the control of state officials. Hence state capitalism necessarily allows government officials and bureaucrats access to cash. At the same time, access to purse strings helps those who control the levers of government safeguard their domestic political capital.

As pointed out by Bremmer, state capitalism also stems the rise of liberal democracies, because to varying degrees it hampers the flow of ideas, information, people, money, goods, and services within countries.

The new importance of the state had become obvious well before the onset of the current crisis. Energy markets provide a good example. As pointed out in the same article by Bremmer:-

The world's 13 largest oil companies, measured by the reserves they manage, are now controlled by governments. Saudi Aramco, Gazprom (Russia), China National Petroleum Corporation (CNPC), National Iranian Oil Company (NIOC), Petróleos de Venezuela (PDVSA), Petróleo Brasileiro (Petrobras), and PETRONAS (Malaysia) are all larger than any international oil company.

Exxon Mobil, the largest of the multinationals, ranks 14th in the world. Collectively, multinational oil companies produce just 10 percent of the world's oil and gas and hold about 3 percent of its reserves. State-controlled companies now are in charge of more than 75 percent of global crude oil reserves.

While Multinationals continue to hold competitive advantages in development and production of deep-sea and other technically difficult projects, this advantage is eroding as the better-managed of the national champions learn from the industry leaders.

In Malaysia, PETRONAS prides itself as being competitive in overseas markets and says equally proudly, that it derives 40% of its revenues from export earnings. The people in PETRONAS cannot be faulted into thinking they are 'government'.

The story extends well beyond energy. Across a broad range of economic sectors, China and Russia are leading the way in the strategic deployment of state-owned enterprises. Other governments have begun to follow their lead. In defense, a growing number of emerging-market governments—power generation, telecom, metals, minerals, and aviation—not content with simply regulating markets, are moving to dominate them.

The global recession has accelerated the trend of state involvement in markets as governments around the world spend billions to stimulate growth and bail out vulnerable domestic industries and companies. As governments become increasingly intrusive in the market, there is a need to build consensus behind the establishment of new rules for financial institutions and more reliable oversight and procedures. You can't have unfettered intrusion without owning up to responsibilities. Governments may be reluctant state capitalists, forced into the role by political necessity, but the effect is the same: a bigger dose of politics in the economy.

With bigger doses of politics into the economy, that will send signals of government activism in the economy. Will this mean more regulatory powers vested in the hands of officials and politicians? Will they become bigger napoleons graduating from the little napoleons?

Because political factors unique to each state will determine the response to each domestic economic slowdown, countries with relatively strong political fundamentals will have a better shot at a quick recovery. Accordingly, much will depend on strong political fundamentals. What are they?

For over 30 years China has undergone tremendous economic advancements. That performance has given the Chinese Communist Party elite deep reserves of political capital, and a surge of national pride has helped the leadership ease public fear, fend off criticism, and shift blame for the slowdown onto corrupt capitalists. Given the vast sums its government can spend on fiscal stimulus, China will likely emerge from the global recession before most of the developed world.

This will further persuade the Chinese leadership that state control of much of the country's economic development is the most reliable path toward prosperity—and, therefore, domestic tranquility. The example in China will encourage the rise of state capitalism more.

But it is also true that when political considerations are given preponderant weight, it can also lead to abuses and uncertainties. Just look at what is happening across the world. In USA, as Democrats and Republicans in Washington, fractious lawmakers in Brussels, the champions of competing industry groups in Beijing, the leaders of powerful Kremlin factions in Moscow, and political officials in Delhi make more of the key decisions on how, when, and where assets will be valued and resources allocated, we're bound to see a higher level of policy incoherence that will weigh on future growth.

There are plenty of good reasons for political leaders to intervene these days in domestic economies. Very often they are justified on grounds of wanting to offer better-crafted rules for future flows of cash, goods, and services. But this acknowledgment cannot obscure the fact that markets do these things more efficiently and effectively than politicians do.

Rise of economic cronyism.

Politicians do the following things. They will want to rescue their domestic economies and the way they do that, is not always economically rational. They're primarily interested in bolstering their personal stores of political capital by serving and protecting their most powerful constituents—be they local voters, political benefactors, or powerful industries and interest groups. They will have plenty of opportunities to favor selected and crony companies at the expense of nimbler and more efficient competitors.

Demand for more subsidies.

Politicians will turn increasingly toward a familiar and reliable tool: subsidies. Never mind that many governments may no longer be able to afford them, political officials will protect well-connected local companies, particularly while access to cash is at a premium, depriving the less-well-connected domestic firms of their competitive edge. In some countries like Russia, the government has used state-controlled commercial banks to bail out preferred companies.

Finally, the financial crisis will encourage governments around the world to reshape their regulatory environments, changing the rules of the game for both foreign and domestic companies. Danger sets in when the ground rules are changed regularly and economic decisions are difficult to make under conditions of uncertainties.

Will state capitalism completely reverse free trade progress? That's highly unlikely. The global financial crisis has not proven that government-engineered growth can outstrip the expansion of well-regulated free markets over the long term. Efficient allocation of resources is best left to the market system and to private enterprise.

When political considerations outweigh economic rationales, costs may be high. States like China in which state capitalism is dominating pays for its economic progress with high environmental costs. Russia's reliance on Vladimir Putin at the expense of credible governing institutions put such a country's economic resilience to the test.

Free trade and capitalism do not depend on the wisdom of political officials for its dynamism. That's the primary reason it will almost certainly withstand the state capitalist challenge. Attributing omnipotent wisdom on political figures and the state breeds precisely the fatal conceit opposed FA Hayek.

But the current global financial crisis will ensure the growth of state capitalism over the next several years. The arc of its trajectory will depend on a range of factors: any wavering of faith in the power of free markets, our capacity to kick-start our economic growth, the ability of governments dependent on oil exports to withstand the pain inflicted by lower prices, our ability to create jobs, and dozens of other factors.

In the meantime, corporate leaders and investors must recognize that market system is no longer the unchallenged economic paradigm. Politics will have a profound impact on the performance of markets for many years to come. The survivors are those who adapt.

Acknowledgment: The main ideas for this article were spawned by a recent article by Ian Bremmer in Mckinsey Quarterly. I have used them liberally and have made suitable adaptations to local scenario.

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PETRONAS- the Empire strikes back?

will the PM remove the posts please?

I thought the PETRONAS issue has come to an end. Someone told me to sudah sudah lah. Stop demonizing TDM.

The issue is still alive. Tun Dr Mahathir has just published an account of the monies received by the government over a number of years. During his tenure as PM, the government received RM168 billion. From 2004 to 2009, PETRONAS gave 253 billion. The upshot of his argument: Pak Lah received more money and was not able to account for the application. Mana itu wang pergi?

Tun Dr Mahathir speaks in the capacity as PETRONAS advisor. It is essentially a ceremonial post. It was meant as a goodwill post for retired PMs to spend their time. If anyone were to occupy it, other than TDM, that post would be inconsequential. If an ex minister were to occupy it for instance, the effect will be so too.

But TDM was PM of Malaysia for 22 years and he is a larger than life figure. For 22 years PETRONAS was directly under him. The PETRONAS president reports to him directly and when they do meet there were 4-eyes meeting. The PETRONAS president will go back and brief the board; this is what the PM wants. If he says, I had a meeting with the PM, and he wants two of you to jump off the sky bridge, there is no way anyone can verify what were actually said. In other words there is no check and balance.

The current PM now wants a check and balance. Hassan Merican has been PETRONAS boss for 15 years. The PM wants to balance the seemingly wide powers enjoyed by the PETRONAS president by modifying the profile of the board. But the CABINET of PETRONAS thinks this as interference in its domestic affairs. It is now carrying a rear guard action and will carry out a protracted battle.

Enter TDM- the larger than life figure. The de facto numero uno of PETRONAS. From fortress PETRONAS which is essentially behaving like a government, the board becomes emboldened because it has TDM as protector. The PETRONAS board knows the present government is not that strong. It also knows that DS Najib is loathed to clash with TDM.

For TDM, PETRONAS is his last bastion to flex similar 'prime ministerial powers'. If PETRONAS likens itself as a government, that analogy confers on TDM a surreal sense of speaking as another PM.

Hence, speaking as PM of PETRONAS, he asks, how did you people spend the 253 billion in 6 years compared to how I spent 183 billion over a period of 22 years? Only an overseer asks another who he sees as subordinate, the latter's conduct. By asking the provocative question, TDM makes it out that our government is answerable to PETRONAS. Perhaps this sense of omnipotent powers derives from the knowledge that PETRONAS has been saving this country. It does so by paying out dividends, royalties, taxes and other forms of payments. Perhaps it is also thinking, it is better at managing its financial affairs than its 'rival' government.

Let us see how it is in PETRONAS land. TDM has been PM for PETRONAS for 28 years. (1981-2009). Maybe the problem which DS Najib is facing with PETRONAS now could have been solved, if he had written to TDM instead of Hassan Merican. I do not think that TDM would give this Omar Mustapha Ong a second glance. But the character of this Omar Ong has assumed larger proportions because he is made out to be seen as a challenge to the autonomy of PETRONAS. This autonomous region in Malaysia called PETRONAS has a PM named Tun Dr Mahathir, the man who made Malaysia what she is today. That simply can't be tolerated. It is impertinence of the highest order.

So, the seemingly simple and as a matter of fact asking how we have spent the PETRONAS money, is highly provocative. TDM doesn't do things without intending to influence the outcome.

PETRONAS with TDM stand in one corner. At the other corner is the current PM. Omar Ong is just the water boy.

We are currently witnessing an ongoing power play on PETRONAS stage. This is what it is actually. The PETRONAS board of directors whose security of tenure depends on the judgment of the PM is playing hardball. When they are doing is to make the PM lose face. The outcome is obvious.

This whole thing about Omar Ong is just a rear guard action by the Hassan Merican and the Board. First to save his own job, having served 15 years as PETRONAS President having the power over death and taxes just like the PM. Heck! He may even think he is the other DPM to PM Mahathir. The real PM wants to balance things up and place his representative there. Why he likes Omar, we don't know. Maybe he sees Omar all the time and sees nothing wrong with this chap. On the other hand he sees good talent.

It seems the PM wrote to the PETRONAS president sometime in May this year appointing Omar Ong to the board. The letter wasn't meant for further deliberations. The president must have taken this matter to the board and the board dutifully said no. We are not privy about the way he conveyed the message. Perhaps it was more like this: - 'guys I hear the PM wants to appoint our friend Omar Mustapha Ong as board member. If we are not careful, you people will be put out to pasture. It will be the end of the world as we know it. Unfettered, unencumbered, we are the other government'.

Imagine the horrors of the other members of the board upon hearing these words. No more first class travel, fat allowances, maybe some business deals, no more cavorting in the Petroleum Club. No more free access to PETRONAS Philharmonic performances.

Hassan Merican has been called twice to see the PM and asked to explain why the appointment has not taken place. He is likely to say, it wasn't his decision, but this board..Dato Sri…

PETRONAS has only one shareholder. It must listen to the shareholder which is the PM who represents the country. Sure PETRONAS is our largest taxpayer, contributor etc etc, but never forget you are not a supra government body.

The other PM, Tun Dr Mahathir has just now posted a provocative article on the amounts of money received over the years.

How was the money applied? During Dr Mahathir's time we see it applied to tangibles. KLCC, Putrajaya, bailing out Bank Bumi, bailing out businesses here and there and undertaking hig profile public relations mega projects. Whether they are frivolous or not, we can debate about the money spent. During Pak Lah's time, where the money went, no one knows. We have nothing to show. Maybe they have been taken up by the intangibles- Islam Hadhari and human capital.

One thing I know, during the good times when the price of oil was good and our earnings were high, we forfeited the chance to balance our budget. We kept on returning deficit budgets year after year. Now, the price of oil isn't that good, the world economy is reeling from recession; we don't have the money to sustain our standard of living.

What happened to the PETRONAS money? The board of directors know. Now, it is said, the BOD must exercise its independent mind and act in the best interests of the country. This is a fallacious argument. It was never 'independent' previously during the tenure of Dr Mahathir and Pak Lah. It has absolute no say, in the matter of how money given to the government was being spent.

Now, if we follow the drift of those supporting that the PETRONAS BOD must be free from interference, are these people suggesting that PETRONAS now enters into a period of activism and will now supervise how money it gives to the government is being spent? I think PETRONAS is not a supra government having jurisdiction as to how its money given to the government is being spent. PETRONAS supervises its own coffers. It answers to its shareholder- the government.

The government on the other hand is answerable as to how it spends the money given them. It answers in parliament and answers to those public spirited and civic minded citizens of this country.

During those times it managed its own coffers were there interferences into their affairs? If there were, then PETRONAS must tell us. If there were, then it is mischievous to insist that NOW PETRONAS must remain independent. It has never been. Now because we have a new PM who is about to embark on his own journey, we adopt this holier than thou attitude. Suddenly we become sanctimonious about it.

Why now, under Najib, the PETRONAS BOD must be endowed with a quality of independence? Well, it wasn't independent those years under Dr Mahathir and 5 years under Pak Lah.

This raises several issues. Are these people telling us that the present PM stays out of PETRONAS but previous PMs were allowed to? That would suggest that DS Najib is not sufficiently competent to supervise PETRONAS but previous PMs were. Well, to most people, Dr Mahathir when he was PM was competent and therefore allowed to determine the BOD. Pak Lah was a mistake and now the present PM is deemed to be the company of Pak Lah. Indeed, it would seem that DS Najib is even worse off- he isn't allowed to come near PETRONAS at all. Somehow, it would seem that DS Najib in terms of managing PETRONAS business is less endowed than say Dr Mahathir?

I think PETRONAS has misdirected itself if it thinks it can be the conscience of this country. That role lies with political parties and is decided in parliament. I don't think we are deficient in the numbers of those wanting to be the voices of conscience for this country. There is no need for PETRONAS to arrogate upon itself such role.

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The PETRONAS issue again.

If push comes to shove, the PM in asserting his will can do the following.

• Re-constitute the entire PETRONAS BOD.
  
• The PM can also replace the PETRONAS advisor.
  
• If the government is answerable on its financial management of this country, make PETRONAS answerable to parliament.
  

It would be interesting to have PETRONAS answerable to parliament. People have been complaining that PETRONAS is not answerable to parliament. Yes, they do read what PETRONAS published in their books and publications. But nowadays people are more critical. Since PETRONAS is owned by the people through agency of the PM, it must be brought to bear for its activities in Parliament.

Insulated from public and political scrutiny has allowed PETRONAS to behave beyond reproach. Maybe it has also spawned a nose thumping attitude among its employees. Maybe they think themselves as the privileged few. Perhaps like one blogger suggested, they represent the epitome of Malay management success. Perhaps all those are correct.

It is also true that, these days we must avoid blind trust. Why should anyone accept in good faith whatever PETRONAS employees think of themselves? Many of them think the world of themselves judging from the vitriolic responses whenever doubts concerning their professionalism and hear this, their patriotism were made. They are just the same like you and I.

We are actually tired of claims by PETRONAS employees that they are very patriotic people and that to keep PETRONAS within their exclusive control reflects their patriotism. When it comes to money, PETRONAS employees are likely to throw out their patriotism. Just like many people too. In recent years, PETRONAS has been losing many staff to Middle Eastern oil companies because of higher pay checks. So, money is the great humbler.

The public has a right to see how PETRONAS conduct itself in business affairs. Maybe the PM, like the public, wishes to see a greater sense of accountability. The people want to know how are the three agreements with Uzbekistan on production-sharing, exploration and petrochemical projects. What has happened to its purchase of FL Selenia, Europe's largest independent producer and marketer of branded automotive lubricants, for about US$4 billion? Has its purchase of Woodside Energy Ltd's Mauritanian subsidiaries for US$418 million resulting in PETRONAS gaining significant interests in eight upstream units in the country been good? The people also may be interested in finding out whether its purchase of US$1.1 billion worth of shares in the IPO of the troubled Russian oil giant ROSNEFT was a sound business decision? Or was that decision out of bounds from prying eyes?

In spite of its prowess in overseas ventures leading it to claim that 40% of its revenues are generated from these ventures, how did PETRONAS then lose out or ignored the chance to participate in developing Iran's GOLSHAN and FERDOWSKI gas fields? Has PETRONAS been less diligent in this deal allowing instead the business chance to be taken by Syed Mokhtar Al Bukhary's SKS ventures? SKS is a private business entity who succeeded in the deal. How was its possible for PETRONAS to not sight the possible deal on its business radar screen? Either PETRONAS management or its 'must-protect-at-all cost' BOD have been negligent in their duty to at least participate in the bid to get these fields.

How did the BOD conduct itself on the affairs surrounding SCOMI for instance? It has not explained how SCOMI has managed to secure sizeable business deals when Pak Lah was the PM. Scomi Group Bhd is a listed company provides oilfield drilling lubricants, engineering services, and other petroleum-related services. It has been said that Scomi has received RM1 billion worth of government contract. It got a contract from PETRONAS that was valued at approximately RM157 million in Turkmenistan.

Many regard PETRONAS as Malaysia's best-run government-linked company. We can accept that. Many of its employees are highly trained and dedicated. Its management is highly regarded too. These would support our contention, that PETRONAS and the government should not restrain itself from being upfront about its financials. If decisions made were sound business ones, PETRONAS shouldn't hesitate to allow scrutiny by parliament.

What was the BOD's stand when in the 1980s, PETRONAS was forced to purchase a Boeing 747 jumbo jetliner and lease it to the government-owned Malaysian Airline System? MAS had signed a letter of intent to use only Rolls-Royce engines on its 747s. This particular Boeing 747 uses engine made by Pratt and Whitney. To skirt around the contractual obligations and to push through the purchase of the Boeing 747 with Pratt and Whitney engines, why not ask PETRONAS to buy instead? Then PETRONAS can lease it to MAS saving MAS from being accused to have reneged on its agreement. Brilliant maneuver! But, this would have meant, the PETRONAS BOD was powerless.

To suggest now, that PETRONAS BOD must stand its ground and assert its 'independence' is irresponsible. My contention is it has never been independent. Placing it answerable before parliament is better. How independent was PETRONAS BOD previously? Well, in 1998, the oil company was forced to use its shipping arm, Malaysian International Shipping Corp Bhd, to acquire a debt-laden Konsortium Perkapalan Bhd (KPB), which faced debts, estimated at about RM1.7 billion. It also became the anchor tenant in PETRONAS Towers, the two iconic buildings that were also critically short of tenants in the years after they were completed. In other words, it has been used as a salvaging crew.

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