Questions and answers on how the poll outcome could reshape Malaysian political and financial policy

Following are questions and answers on how the poll outcome in Sarawak State Election could reshape Malaysian political and financial policy.

Was it a big win for Najib?

Not really. BN won 77 per cent of seats in the 71-member state legislative but the opposition increased its seats to 15 from the 7 it won in the last polls in 2006, a major feat in a state where the ruling coalition has always held near total political dominance.

Mainstream domestic media mostly hailed the BN’s performance as a major win, although most newspapers also warned of a further erosion of support.

“With the opposition emerging as an even stronger player in (Sarawak) and willing no doubt to use its greater share of state seats to build support for the next general elections, there is a great need to take stock,” the pro-government New Straits Times said in an editorial.

How will Sarawak affect Najib’s general election timetable?

A general election is not due until 2013. Some analysts had said a strong showing in Sarawak might have tempted Najib to call an early poll this year. That now looks unlikely.

“We maintain our view that the general elections will be held in 2012 rather than 2011,” Credit Suisse Research said in a strategy report today.

What is at stake?

Complaints about ethnic and religious discrimination were a major source of voter discontent in Sarawak which helped the opposition to gain ground.

Ethnic Chinese and Indians, who make up about a third of Malaysia’s population, complain that their rights have been increasingly eroded as the government panders to the wishes of majority ethnic Malays.

A squabble over the government’s seizure of Bibles, allegations of racist slurs by government officials and a dispute over the right of Christians to use the word “Allah” have all fanned ethnic minority anger.

Najib needs to regain the trust of ethnic minorities as Sarawak and neighbouring Sabah, which both have a sizeable non-Malay population, hold the key to national power. The two states account for 56 seats in Malaysia’s 222-seat parliament.

What does Najib need to do, and can he pull it off?

Holding a general election later rather than sooner would buy Najib time to regain support but he would need to rethink his approach to economic reform. Instead of proceeding with fuel subsidy cuts and rolling out a goods and services tax, the government could seek other avenues to widen its revenue base without further denting popularity.

But a delay in cutting subsidies and boosting revenues could derail the government’s goal of further reducing its budget deficit. The deficit hit a 20-year high of 7 per cent of gross domestic product in 2009 before falling to 5.6 per cent in 2010 and is projected to be 5.4 per cent this year.

The Economist Intelligence Unit said Malaysia’s budget deficit would be 3.9 per cent in 2015, “somewhat above the level considered prudent”.

On the political front, any move by Najib to placate Chinese and Indians could anger conservative Malay Muslim groups which form a core support base for the ruling coalition.

A coalition of Muslim groups known as Pembela (Defenders) protested last Friday against what they said were excessive government concessions in talks with church leaders to resolve the Bible seizure row.

What are the implications for the opposition?

Opposition Leader Datuk Seri Anwar Ibrahim is expected to try to capitalise on ethnic minority discontent with the government to build on the support the opposition drew in the Sarawak poll.

Analysts say that with the Sarawak outcome, the three-party opposition alliance appears to have stemmed a recent slide in its popularity triggered by a spate of election losses and Anwar’s ongoing sodomy court case and his alleged involvement in a sex tape scandal, which he denies. — Reuters

Happy Chinese New Year

On behalf of The Leaders team, here’s wishing Gong Xi Fa Cai to all our Chinese friends and colleagues and Happy Holidays to the rest of the gang!

What Are We To Do

By;

Tan Sri Lin See-Yan, Ph.D*

“Go East, Young Man”

I spent the year-end holidays with my entire family, plus two new grandkids in tow on a nostalgic “balik kampong” trip to Ipoh.  Our target was The Banjaran, a new resort and spa perched at the foot of limestone hills and caves in Tambun (world famous for its pomelos) outside Ipoh.  It’s a world class hot-springs retreat with only 25 villas (each with its own hot-spring jacuzzi and swimming pool).  It’s an eco-friendly resort with lots of green (even a spice garden) and picture perfect surroundings.  It comes with a fantastic wine-cellar set inside natural high ceiling limestone caves, complete with Malaysian style Bali-Thai type spa that provides complete relaxation.  It also has a pool of garra rufa fishes that love to chew-up dead and excess hard cells your feet may spare.  This venture is the brainchild of Tan Sri Jeffrey Cheah who must be congratulated for creating a visionary retreat, using to the maximum all that nature has endowed around the scenic caves.  It’s a treat.

Ipoh

Ipoh was built on the riches of tin-mining.  With tin now a distant memory, Ipoh is at the heart of a thriving industry of small businesses besides nearby palm oil plantations, thriving E&E foundries and chip makers, and small farms growing groundnuts (world famous Menglembu), pomelos, star fruits and seedless guava.  Ipoh has always been famous for its food especially hawker food, offering the best there is in Asia - from fresh large-headed Tualang udang gala (prawns) to its thick and juicy bean sprouts, from delicious baby-bottom-soft sa-hor-fun to its amazing chicken-feet preparations; from the smoothest ice-kacang there is to its best spread of traditional hawker food imaginable.  It is not uncommon to eat 5 times a day here (we did six!). 

What impressed me is the vibrant spirit of private enterprise that Ipoh has come to be now famous - innovation in biscuit making, coffee & charcoal toast, ornamental fish, delicate tow-fu-fa, unusually large tropical fruits, and ready-to-serve food, including exotic sea-food.  For me, a must is dry curry-mee & sui-kau for breakfast and sa-hor-fun soup plus beef tendon balls for lunch, dunked down with lots of Ipoh coffee.  The last time I was here, most shops were small, dirty and crowded (but with long queues).  At my favourite place in old town, the owner has since embraced technology - new and bigger premises, now clean and spacious, computerised ordering from a long wish list, and spread-sheet billing and accounting.  Business is thriving.  There is also Ipoh’s famous biscuits, like the delicious curry-puff shaped pastry with steamed coconut-egg jam filling - sells like hot cakes:  most buying 5-10 boxes of 10 each; only Singaporeans buy them by the 100s.  No doubt, private entrepreneurship is thriving - no government assistance (want government to remain hands-off & just improve service delivery).  It’s not just local business - they export and attract tourists.  Unfortunately, the town remains rundown with little renewal.  What a pity.  But its new suburbs are modern.

Looking forward to 2011, they are an optimistic bunch.  It’s this optimism about what they do in Ipoh that impresses me.  They are transforming   Better government facilitation in terms of ready availability of finance, quick access to land for expansion, and improved infrastructure and logistics are what is needed to solidify this transformation.  In Ipoh, the beginning of transformation is on the move.  This is as it should be throughout Malaysia.  There is hope yet.

Shift in optimism       

Hope and change - overused words since the great recession.  For the past 400 years, the West monopolised optimism.  Their intellectual discourse on enlightenment eventually led to harnessing of technology and modern management to impose their will on the world.  US founders offered not just life and liberty but also the pursuit of happiness.  Optimism is now shifting - you want to prosper, go east; that’s where the action is.  Growing pessimism in US is overwhelming politics as shown in the mid-terms.  Winning Republicans are hardly optimistic - reflecting I think rather more anger and resentment.  Europe is no better, with mass demonstrations from Athens to Dublin, London to Paris, Rome to Madrid.  I sense there is pessimism even at the euro-zone core.  The best seller in Germany is T. Sarrazin’s “Germany Does Away with Itself”. The French have J-P Chevenement’s “Is France Finished”, and “French Melancholy” by E. Zemmour.  In contrast, modern art in China is colourful and bright, portraying rising materialism, growing prosperity and open life style.  Painting is aggressive and innovative; always ready to experiment. The contrasting attitudes have become more marked since the recession which shook the very foundations of the system the West built, and have now lost confidence in.

The growing growth gap is stark.  China and India will each grow by close to 10% in ’11 (like in previous two years).  With recovery, the US will grow 3% and euro-zone, 2%.  Unemployment is worse: near 10% in US where more than 1 million may have given up looking for work. Europe is even worse - unemployment is very high among youth in Germany; 41% of Spanish youth is unemployed.  The malaise goes deeper.  Growing numbers of US parents worry their children’s living standards may be worse than theirs.  After all, medium workers’ real income has remained more or less the same since mid-70s.  They worry that failing schools and lack of suitable jobs will handicap them in pursuit of the American dream.  European dreams are different - they remain cosy in their EU-cocoon with generous welfare security.  But high debt and rising social discontent in the context of an aging population are not making it easy to continue carrying the burden of unaffordable entitlements.

Emerging Asia is in constant motion - building infrastructure and logistic hubs, and institutes of higher learning.  China’s university population has quadrupled in past 20 years.  UNESCO estimates 38% of world scientific researchers is based in emerging nations in ’07 (30% in ’02).  Chinese and Indian world class enterprises now compete aggressively with their western counterparts. In technology, these firms are redefining the boundaries of the possible.  Harvard’s Prof. D. Jongenson sees Asian emerging markets as the “most dynamic …eclipsing others such as Brazil and Russia…the size of the Chinese economy (will be) on par with the US by early 2020.”  This may be difficult for many Americans to swallow.  He warns the US should brace for social unrest amid blame over who lost US global economic primacy.

US growth prospects

The US “new normal” remains: sluggish growth, stubbornly high unemployment and weak inflation – same like last year.  The growth forecasts have since shifted higher for ’11 to 3-3½%.  This is driven by extraordinary policy measures, including QE2 (a second quantitative easing by the Fed pumping US$600 into the economy by buying government bonds) and the 2^nd stimulus package (US$800b through extension of the Bush-era tax cuts and a temporary reduction in payroll tax).  However, Harvard’s Prof. M. Feldstein believes the outlook is less sanguine.  The impact of fiscal expansion will be modest at best.  The dire situation of state and local governments is likely to be a drag on growth.  Indeed, growth was boosted in ’10 by a fall in household savings.  But households now worry about uncertain future, return to paring back debt and stocking more away - purely precautionary saving.  Prof. S. Johnson of MIT puts it more bluntly: damage from the crisis and its aftermath have dealt US prominence a permanent blow - “The age of American predominance is over.”  I believe the new normal will stay for some time mainly because US and European governments are unwilling to grasp the nettle on exit strategies.  The policy dilemmas before the major governments are clear: (i) in US, there is no political will to restructure - I see continuing resistance to the new reality of sluggish growth; (ii) in Europe, governments were forced to intervene with their balance sheets which implications are now being played out; and (iii) in China, management of continuing rapid growth has to deal now with rising pressures on inflation and the yuan.  This has led Mr M. El-Erian of Pimco (the largest global bond investor) to conclude: “you see the muddling through approach continuing.  Everybody might now want to kick the can down the road.  The problem is that the longer you muddle through, the more you create problems.  I see the new normal as being stable for a while yet.”

Impact of rising debt

More serious is contagion of the European debt crisis which started with bailout of Greece and then Ireland.  Will this reach Portugal and Spain?  The problem is likely to widen: (i) how far reaching will this impact other parts of Europe; and (ii) it’s just a matter of time before this concern assumes macro-proportions covering the entire national debt, including private sector.  Soon, the worry will shift to banks and companies as they will now find it harder to borrow.  The risk is if Spain is not protected, bigger nations will be next in line.  Unlike Japan and Italy (where private sectors are net savers), Spain remains vulnerable even though its government debt is relatively lower, but it carries enormous company and household debt. Debt to GNP ratio of government and banks combined in the US, UK, core Euro-zone and peripheral Europe are all at 150-200%.  That’s higher than at any time in the past century.  How big is this problem? Harvard’s Prof. Rogoff and Reinhart’s research suggests a country’s growth potential slows significantly once debt/GDP ratio exceeds 90% - a level the US is at today.  I agree with Rogoff at this time the crisis will not affect US and the majors  -  they still have cards to play.  Psychology too plays a big part since US is grounded more in growth than inflation and Europe being dead set against inflation will trade-off growth.  Between the US and Europe, my bet is on Europe to be the first to raise interest rates  So, more pain for Europe.

Looking forward, some nations are unlikely to handle their debt overhang without restructuring, a lά Argentina ’02.  This is a messy process, with other high debt nations swept in the contagion.  In a globalised world, how big the problem becomes depends on confidence.  So we do have a fragile situation not only in Europe but US as well.  This situation is serious:  in the event creditors and debtors worldwide erupt into a full scale war, debt-financed growth will become history.  Creditors do get tired of kicking the can down the road and debtors can get adjustment/austerity fatigue.  Such an impasse can only be resolved in the long run through a transfer of wealth from creditors to debtors.  I think the fear of default will eventually get creditors to blink first.

Fault lines haven’t gone away

While it is clear the world economy has now recovered, it is also clear the crisis is far from over.  This is because the deep fault lines uncovered during the crisis are still within the Western economies and global economic structure.  According to Chicago’s Prof. Raghuram they present two risks:  (i) structural export dependency particularly in Japan, Germany and China; and (ii) unresolved clash of financial systems making it difficult to forge integration.  They will threaten global stability in two ways:  (a) pre-mature tightening of monetary and fiscal policies poses the danger of tipping the world back to recession; and (b) failure to secure a medium-term structural shift to fiscal austerity, so vital for sustainable global recovery.  So, the world remains a dangerous place; but nothing moves in straight lines.  One thing is certain:  the west is not the power it used to be; their consumers cannot be relied upon as they used to be; and their financial standing are not as good as it used to be.  Structural reform is needed to avoid another global crisis ahead.  At the heart of it all is the US – it may have missed the chance to rein in its largest financial institutions, many of which remain too big to fail and are getting bigger.  In the long-run, US must face reality - inevitably it will be over taken by China as the world’s largest economy; and the centre of economic power will gravitate to Asia.  But America as the biggest mover will be in place for a long time.

As 2010 ends, Asia moves on aggressively. Manufacturing in Korea and Taiwan accelerated in December even as expansion in China and India slowed, with US and Europe supporting the region’s exports.   Overall, the world had a good 4Q’10 as the US economy also continued to grow although the underlying fundamentals remain weak.  But the world wakens to new challenges.  The internet now provides ready access to information for all, which previously was reserved for just a few.  Medical advances are making strides in overcoming diseases and extending lifespan for the benefit of all.  History reminds us that for so long only the privileged few can look forward to a better life.  Today the masses in Asia can. Prudent growth and benevolent management will make this possible.  Surely, that’s good enough reason to be optimistic.

Kuala Lumpur                   

January 13, 2011  

 * Former banker, Dr Lin is a Harvard educated economist and a British Chartered Scientist who now spends time writing, teaching & promoting the public interest. Feedback is most welcome; email: starbizweek@thestar.com.my

ASEAN Retail-Chains & Franchise Federation Awards & Installation Night 201

The Leaders Magazine had the honoured to be a partner co-hosting the ASEAN Retail Chains & Franchise Federation (ARFF) “Awards and Installation Night” on 19^th November 2010 in Sunway Convention Centre, Sunway, Petaling Jaya. The glittering night is made special with the special performance by Dato’ Khadijah Ibrahim and Elaine Kang, Malaysia outstanding diva.

The night is also a very special night recognizing outstanding individual and brands who had made significant impact in the ASEAN Business Community. Among the awards winner are Air Asia Berhad, ING Fund Berhad, Sunrise Berhad, Limkokwing University of Creative Technology, Bonia, Pathlab, Snips, Old Town White Coffee, Little Taiwan, Sunway Lagoon and many more.

The Leaders Team is also very fortunate to have its COO, Mr. Chris Daniel Wong receiving the ASEAN Region Most Outstanding Personality Award. An award given to recognized his enormous contribution in the ASEAN region particularly in the growth for retail-chains and franchise industry.

The event was graced by YB Dato’ Donald Lim, Deputy Minister, Ministry of Finance, Malaysia representing Deputy Prime Minister of Malaysia, YAB Tan Sri Muhyiddin Yassin. Other dignitaries that also graced the event are foreign dignitaries, affiliates from the 10 ASEAN countries, China and India, and prominent business leaders.

Kudos to ARFF for a well done job! We look forward towards this event again next year.

Corporate Malaysia Forum: Re-Engineering Private Growth

Coming soon, Corporate Malaysia Forum: Re-Engineering Private Growth on 16th November 2011, 10 am to 4pm in Berjaya Times Square Hotel. The forum will aim to discuss how to propel Malaysia forward as a high income nation and evaluate Budget 2011.

Speakers from a diverse industry back ground will share their thoughts about this two topics. Among them are YB Khairy Jamaluddin, YB Tony Pua, Datuk Kayveas, Ong Kian Meng, Datuk Nadzmi and Mathias Gelber (voted as the Greenest person on earth).

For those who are interested to know the gist of Budget 2011 and what in it for you, please do not miss the forum. For more information please contact Ms. Faizah at faizah@theleaders-online.com

1Malaysia Entrepreneur Awards 2010

(Picture from left: Chris Daniel Wong, COO, The Leaders Magazine; Dato' Sri Tony Fernandez, Group CEO, Air Asia Berhad and Tiffanee Marie Lim, AVP, Limkokwing University of Creative Technology)

The Leaders Magazine did it again!

The 1Malaysia Entrepreneur Awards, an initiative begun by Biro Ekonomi dan Pembangunan Usahawan Pemuda UMNO Malaysia (BEPU), in collaboration with the Leaders Magazine, sought to highlight the achievements of Malaysian entrepreneurs in various fields.

Held on October 17 at the Putra World Trade Centre (PWTC), the Award Ceremony served to highlight the ideals espoused by Prime Minister Dato’ Sri Najib Tun Razak’s 1Malaysia ideology - a point further reinforced with the fact that Award Winners come from all of the races of Malaysia. 

The event, aiming to recognise the achievements of Malaysia’s leading business leaders and honouring their contributions towards the country’s economic development, was graced by YB Khairy Jamaluddin and members of UMNO Youth, in what can be seen as tacit approval for the goals of the Award Ceremony.

Winners such as Datuk David Yeat Sew Chuong (INS Bioscience Bhd), Mr Ramaness Parasuraman (Return2Green Sdn Bhd) and Dato’ Jamal Md Yunos (Rukun Saksama Sdn Bhd) serve as examples of the great diversity and resilience of the Malaysian Entrepreneurship spirit.

YB Khairy Jamaluddin, commenting on twitter after the event, hopes that the Awards will be an inspiration to all Malaysians, and hopes that the event will be held again next year.

The list of winners is as follows:

Masterclass Entrepreneur of the Year

Tan Sri Dato’ Sri Leong Hoy Kum - Mah Sing Group Bhd

Dato’ Sri Nazir Razak - CIMB Group Holdings Bhd

Dato’ Sri Tony Fernandes - Air Asia Bhd

Awards Sectoral

Outstanding Entrepreneur of the year - Dato’ Sri Edmund Santhara - Masterskill (M) Sdn Bhd

Emerging Entrepreneur of the year - Dato’ Jamal Md Yunos - Rukun Saksama Sdn Bhd

Emerging Woman Entrepreneur of the year - Tiffanee Marie Lim - Limkokwing University of Creative Technology

Automotive - Dato’ Hj SM Faisal - Naza Group of Companies

Entertainment - Tuan Haji Burhanuddin Md Radzi - Les’ Copaque Production Sdn Bhd

Technology - Datuk Shahril Shamsuddin - Sapura Group

Telecommunications - Digi Telecommunications

Bioscience - Datuk David Yeat Sew Chuong - INS Bioscience Bhd

Engineering - Datuk Ir. Kuna Sittampalam - HSS Engineering Sdn Bhd

Pre-Development Land Investing - Dato’ Abdul Razak Abdul Ghani - Walton International Property Group (M) Sdn Bhd

Household - Lim Kim Heng - Sen Heng Electric (KL) Sdn Bhd

Renewable Energy - Ramaness Parasuraman - Return 2 Green Sdn Bhd

Food & Beverage - Dato’ Hj. Syed Jamarulkhan - Syed Restaurant & Catering

Services - En Halmi Jasmin - Metro Parking (M) Sdn Bhd

Textiles & Fashion - Mohamed Faroz Mohamed Jakel - Jakel Kuala Lumpur

Energy & Engineering - Shafiz Shahrani Al-Haj - Shahpadu Energy & Engineering Sdn Bhd

Budget 2011

The Leaders note that the budget has all the hallmarks of a consultative budget and a foundation-setting budget with lack of surprises. We do see a small increase in spending levels but we will not be uncomfortable with it as the external environment could pose headwinds towards the budget. The budget will sets the stage for the Economic Transformation Programme and that the smaller-than-expected cut in the current deficit was understandable given the economic uncertainties in the US and Europe. Some analyst said that it is a balance budget though with small increases in spending levels. For example the plan to raised the service tax to six per cent from five per cent, is sweetened with a slew of measures targeting consumers, such as a five-year freeze on highway tolls, tax waivers on mobile phones and designer goods and stamp duty discounts for first-time home owners.

According to Prime Minister speech the private sector will lead economic growth and the government’s bold moves to spend on infrastructure should boost investor confidence, but some critics noted that the budget was more likely to please voters than investors. Many feel that the RM212 billion spending plan was set to disappoint investors who continue to be frustrated with lack of progress in reforms of Malaysia’s subsidies and its race-based policies.

Whatever it is, The Leaders wish PM and his planned budget all the success to propel Malaysia forward as high income nation.