It is timely that the prime minister has decided to set up the National Economic Action Council (NEAC) 2.0 in anticipation of the looming local and global recession. While few would argue that strategic preparations for this impending recession are needed, one important question arises:
Do the terms of reference of NEAC 2.0 include a review of the controversial pet projects already announced by the PM, namely the third national car, the privatisation of Khazanah and other government-linked companies (GLCs) or are these decisions going to be accepted by the council as fait accompli?
This is essential because after the setting up of NEAC in 1998, the government began to scale back the privatisation programme following the failure of several large privatisation projects and replaced them with professional (state) managers running the GLCs.
The PM’s recent adverse remarks on Khazanah, and how it has deviated from its original goals of temporary ownership of companies on behalf of Bumiputeras, were a forewarning of his plans to privatise Khazanah. Such a strategy is definitely not in the national interest of Malaysian taxpayers.
Failed capitalists bailed out by taxpayers
During the financial crisis of 1997, the state provided support for favoured firms linked to the “Bumiputera capitalists” after the imposition of capital controls, such as reflationary measures which included cutting interest rates and making credit more readily available to these fledgeling firms.
Banks were also encouraged to lend more, and to bail out troubled firms and a new expansionary budget was introduced in October 1998.
The size and nature of Malaysian subsidies to these well-connected firms should be instructive to remind the people of the comparison to the controversy over subsidies for fuel and basic food items to benefit the poor and lower rungs of our society.
These firms that were linked to the favoured “Bumiputera capitalists” received billions in direct and indirect financial support from the government after the imposition of capital controls.
During the financial crisis of 1997/98, it was Khazanah that stepped in to take over the assets of the failed companies owned by the crony capitalists – Renong, MAS and TRI.
After taking over the assets, Khazanah revamped these GLCs with professional managers and better rules of governance. Khazanah currently owns 51% of PLUS Expressways, with the EPF owning the other 49%. By the end of 2017, the net worth of companies under Khazanah was RM125.6 billion.
Certainly, we agree that professional managers in GLCs should not be over-paid — the income ratio in any GLC should not exceed 1:20 between the highest and lowest paid staff.
GLCs, being the peoples’ assets, should be the paragon of labour relations and democracy, demonstrating the use of best practices in environmental, gender and inclusive ethnic relations.
NEAC 2.0 must review the third national car
So far, the PM seems to be the sole champion of this third national car project. We have not heard a squeak from the PKR president, the DAP secretary-general or his father who had been one of the most vociferous critics of the Proton project.
Is there a Cabinet consensus on this third national car project? What about the eminent advisers? Have they advised the prime minister on this third national car project? Since their report has not been made public, they will have to share the responsibility for the prime minister’s decision on this hare-brained scheme.
It is clear that we are all waiting for the young lad in the cheering crowd to shout, “Look, the Emperor has no clothes!”
The reality is that only the totally delusional will claim that the Proton project has been a success. Today’s automotive industry is so very competitive and the fast-changing trends in the automotive industry would require an even higher level of investments in R&D to produce a third national car that can withstand the stiff competition.
So, what happened to the problem of the RM1 trillion debt mountain we are facing and the government’s austerity measures to cut back on mega projects, including much-needed public transport?
The government has already announced millions for R&D for this supposed private initiative.
According to a government study, the cost of Proton to Malaysian taxpayers in the form of subsidies totalled between RM11 billion and RM12 billion by the mid-1990s alone. (Barry Wain, “Malaysian Maverick”, 2012:93, quoting Anwar Ibrahim in Singapore, May 21, 2008)
The prime minister has been asking irrelevant rhetorical questions to detractors such as: “If you want to be a country of peasants, planting rice and catching fish, okay, we’ll do that for you…”
For a start, Malaysia has long transcended a peasant economy. For another, the majority of successful industrialised countries in the world do not have national car projects.
One only needs to look south to see that Singapore does not need a national car project, nor is it a peasant country.
When we look north to Thailand, we see their automotive industry has become the largest in Southeast Asia and the 12th largest in the world, all without even having a national car.
The new Pakatan Harapan government needs more imaginative people-centred economic initiatives that are different from the old BN administration.
The credibility of NEAC 2.0 will be tested from the outset if its terms of reference include the review of the PM’s controversial pet projects, especially the third national car and the privatisation of Khazanah and other GLCs.
Kua Kia Soong is Suaram adviser.
The views expressed by the writer do not necessarily reflect those of FMT.