A BLEAK FUTURE FOR MALAYSIA UNDER BN

TENGKU RAZALEIGH : A BLEAK FUTURE FOR MALAYSIA UNDER BN - PL READ ON

TZ is spot on with his observation. In addition to corruption most
professionals in Malaysia are unethical and ripping the public off in their
greed for quick wealth.

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KUALA LUMPUR: Tengku Razaleigh Hamzah (picture) today painted a bleak future
for Malaysia under the Barisan Nasional government, saying it had squandered
the nation's oil wealth to the tune of billions of ringgit.

The former Finance Minister said Petronas's oil profits had been used "to
bail out failing companies, buy arms, build grandiose cities amidst cleared
palm oil estates.."

"Instead of helping eradicate poverty in the poorest states, our oil wealth
came to be channeled into our political and politically-linked class," the
first Petronas chief and former Umno vice president said in a speech at the
Young Corporate Malaysians Summit.

He said Petronas money had been used as a slush fund to prop up
authoritarian rule, to corrupt the entire political and business elite and
to erode constitutional democracy.

The Gua Musang MP told the conference that Petronas had contributed 40
percent to the national budget over the years.

But such a great reliance on oil income was getting untenable, he said. "The
oil that was meant to spur our transition to a more humane, educated society
has instead become a narcotic that provides economic quick fixes and hollow
symbols such as the Petronas Towers."

He said the future for Malaysians looks bleak with the government seeking
to broaden the tax base by introducing a goods and services tax (GST),
requiring Malaysians to pay an additional tax on top of income tax.

Malaysia is now caught in a middle-income trap, stuck in the pattern of easy
growth from low-value-added manufacturing and component assembly and unable
to make the leap to a knowledge-intensive economy, Tengku Razaleigh added.
Following is the text of his speech:

In a speech I made in April this year, I spoke of where we stand in our
developmental path and what I felt we must do to move forward.
I need to revisit that argument in order to develop it further.

We are stagnating. The signs of a low-growth economy are all around us.
Wages are stagnant and the cost of living is rising.

We have not made much progress in becoming a knowledge and services based
economy.

According to the World Bank, Malaysia's share of GDP contributed by services
was 46.2 percent in 1987. Ten years later, that share had grown by a mere
0.2 percent.

Between 1994 and 2007, real wages grew by 2.6 percent in the domestic sector
and by 2.8 percent in the export sector, which is to say, they were flat
over that 13-year period.

Meanwhile, our talent scenario is an example of perverse selection at its
most ruinous. We are failing to retain our own young talent, people like
yourselves, let alone attract international talent to relocate here, while
we have had a massive influx of unskilled foreign labour. They now make up
30 to 40 percent of our workforce.

Alone in East Asia, the number of expatriate professionals here has
decreased. Alone in East Asia, private sector wage increases follow
government sector increases, instead of the other way around. We are losing
doctors and scientists and have become Southeast Asia's haven for low-cost
labour.

I said that we are in a middle-income trap, stuck in the pattern of easy
growth from low-value-added manufacturing and component assembly and unable
to make the leap to a knowledge-intensive economy.

Regional competitors with larger, cheaper - and dare I say - hungrier labour
forces have emerged.. China and India have risen as both lower cost and
higher technology producers, and with giant domestic markets.

The manufacturing sector which propelled the growth we enjoyed in the 90s is
being hollowed out.. There is no going back, there is no staying where we
are, and we do not have a map for the way forward.

I am glad that the characterisation of Malaysia as being in a
'middle-income-trap' has been taken up by the government, and that the need
for an economic story, or strategy, for Malaysia is now recognised.
We stand in particular need of such a model because we are a smallish
economy. We cannot be good at everything, and we don't have to be.

We need only make some reasonable bets in identifying and developing a
focused set of growth drivers. It is not difficult to see what the elements
of such a growth strategy might be. Whatever we come up with should build on
our natural strengths, and our strengths include the following:

+ We are located at the crossroads of Asia, geographically and culturally,
sitting alongside the most important oil route in the world.

+ We have large Muslim, Chinese and Indian populations that connect us to
the three fastest growing places in the world today.

+ We have some of the largest and oldest rainforests in the world, a
treasure house of bio-diversity when the greatest threat facing mankind as a
whole now is ecological destruction, and the greatest technological advances
are likely to come from bioscience.

+ We have the English language, a common law system, parliamentary
democracy, good schools, an independent civil service and good
infrastructure.

These advantages, however, are declining. Our cultural diversity is in
danger of coming apart in bigotry, our rainforests are being logged out and
planted over, our social and political institutions are decaying. I have
spoken at length on different occasions about the causes and consequences of
institutional decline. The decline in our society, and indeed in our natural
environment, originates in a decline in our basic institutions.

The link between these is corruption. The destruction of our ecosystem, for
example, is made possible by corrupt officials and business people. The
uncontrolled influx of unskilled labour is a direct result of corruption.
These are problems we need to be aware of before we speak glibly about
coming up with new strategies and new economic models. We need to understand
where we are, and how we have gone wrong, before we can set things right.
You are young, well-educated Malaysians. Many among you have left for other
shores. Record numbers of Malaysians, of all races, work abroad or have
emigrated. Among these are some of our best people. They sense the
stagnation I described.

There is a certain lack of energy, ingenuity and "hunger" in the climate of
this country that young people are most sensitive to. In the globalised job
market, young people instinctively leave the less simulating and creative
environments for those that have a spark to them.

How did we lose our spark as a nation?

We have a political economy marked by dependence on easy options and easy
wealth. Like personal dependencies, these bad habits provide temporary
comfort but discourage the growth of creativity and resilience.
I mentioned our dependence on low-cost foreign labour.

The other dependence is something I played a part in making possible. This
is a story I want to leave with you to ponder in your deliberations today.
Our nation is blessed with a modest quantity of oil reserves. As a young
nation coming to terms with this natural bounty in the early 70s, our
primary thought was to conserve that oil.

That is why, when Petronas was formed, we instituted the Petroleum
Development Council. Its function was to advise the prime minister on how to
conserve that oil and use it judiciously for national development. We knew
our reserves would not last long.

We saw our oil reserves as an unearned bounty that would provide the money
for modernisation and technology. We saw our oil within a developmental
perspective. Our struggle then was to make the leap from an economy based on
commodities and low-cost assembly and manufacturing to a more diverse
economy based on high income jobs.

Aware that we had an insufficient tax base to make the capital investments
needed to make the leap, we planned to apply oil royalties to what you would
call today strategic investments in human capital.

Whatever money left after making cash payments, allocations for development
funds, etc, was to be placed in a Heritage Fund for the future. The Heritage
Fund was for education and social enrichment.

In working out the distribution of oil between the states, who had sovereign
rights over it, and the federal government, we were guided by concerns for
equity between all Malaysians, a concern to develop the poorer states (who
also happened to be the oil rich states) and a concern for
inter-generational equity. That oil was for special development purposes and
it was not just meant for our generation.

Sabah and Sarawak joined Malaya to form Malaysia because of the promise of
development funds. Yet today, despite their massive resources, they are some
of our poorest states.

Instead of being our ace up the sleeve, however, our oil wealth became in
effect a swag of money used to fund the government's operational
expenditure, to bail out failing companies, buy arms, build grandiose cities
amidst cleared palm oil estates.

Instead of helping eradicate poverty in the poorest states, our oil wealth
came to be channeled into the overseas bank accounts of our political and
politically-linked class.

Instead of being the patrimony of all Malaysians, and for our children, it
is used as a giant slush fund that has propped up authoritarian rule, eroded
constitutional democracy and corrupted our entire political and business
elite.

Our oil receipts, instead of being applied in the manner we planned upon the
formation of Petronas, that is, according to its original developmental
purpose, became a fund for the whims and fancy of whoever ran the country,
without any accountability.

The oil that was meant to spur our transition to a more humane, educated
society has instead become a narcotic that provides economic quick fixes and
hollow symbols such as the Petronas towers.

Our oil wealth was meant to help us foster Malaysians capable of building
the Twin Towers than hire foreigners to build them, a practice in which we
preceded Dubai. I would rather have good government than grand government
buildings filled with a demoralised civil service.

It is no wonder that we are no longer productive, no longer using our
ingenuity to devise ways to improve ourselves and leap forward.
Malaysia is now an "oil cursed" country. We managed to arrive at this
despite not having a lot of oil.

When I started Petronas in 1974, I did not realise I would see the day when
I would wish we had not uncovered this bounty.

The story I have told is a reminder of the scale of the challenge of
development. My generation of young people faced this challenge in the 60s
and 70s. You face it now. The story tells us that development is about far
more than picking strategies out of a box.

You have kindly invited me to address a seminar on strategies for
reinventing and liberalising Malaysia's economy. But the story of our
squandered oil wealth reminds us that it was not for want of resources or
strategies that we floundered.

Our failure has been political and moral. We have allowed greed and
resentment to drive our politics and looked the other way or even gone along
while public assets have been stolen in broad daylight.

I encourage you to take up the cause of national development with the
ingenuity that earlier generations of Malaysians brought to this task, but
the beginning of our journey must be a return to the basics of public life:
the rule of law, honesty, truth-telling and the keeping of promises.
The Malaysia we need to recover is one that was founded on laws and led with
integrity. With the hindsight of history we know such things are fragile and
can be overturned in one generation, forgotten the next.
Without a living foundation in the basics, you might sense an air of
unreality around our talk of reinventing ourselves, coming up with "a new
economic model" and liberalising our economy.

So before we can reinvent ourselves, we need to reclaim our nation. That
larger community, bound by laws, democratic and constitutional, is the
context of economic progress, it is the context in which young people find
hope, think generous thoughts and create tomorrow.