Saturday, August 12, 2006


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Q&A: Corruption has increased, laments Ku Li ;Beh Lih Yi Aug 11, 06 3:14pm

In this final of a three-part interview, Umno veteran Tengku Razaleigh Hamzah, who is former finance minister, talks at length about the problems confronting our economy.

Malaysiakini: What's your take on the economy?

: Politically, the country is very stable. Nothing untoward is happening - the (general) election was nearly three years ago, the next one will only come about in two years' time. Umno has not much to talk about (nor is there) any tussle within Umno. Everybody is more concern about the economic situation in the country although the Ninth Malaysia Plan has been announced. But people in the marketplace are restless because there is really nothing happening.

People hope after the announcement of the Ninth Malaysia Plan, something big would happen but it has, more or less, petered out. Although the prime minister (Abdullah Ahmad Badawi) announced a number of projects that will be implemented soon costing about RM15 billion - all these will be tendered and not going to take place for another three months or so. With the high expectations, people are a bit disappointed.

I was told the stock market is not performing. The money capital - they said (the investors) try to find safe heaven elsewhere. That is very disturbing because we need the money. Not much of the money come into this part of the world. (There are) competitive giants like China, Vietnam, Singapore – this doesn't help. Singapore is doing remarkably well despite the problem they faced two years ago. With the announcement of two big casinos in Singapore, it will create confidence in the economic future in Singapore.

* YTL Corporation has proposed to build a bullet train to Singapore.

The proposal of a bullet train to Singapore will not help us. It will drive more people into Singapore with just a 45-minute ride, so it's helping Singapore, not helping us. That bullet train is not good for Malaysia, maybe good for the proposer. In fact, it is going to affect Genting (Highlands) as well because Genting doesn't depend so much on foreign gamblers. About 60 to 70 percent of frequent Genting visitors are locals.

All this is not helping us although economically we are okay. We are getting good returns simply because of high crude oil prices. Palm oil prices have value because of high crude oil prices. Our rubber seems to be doing better because of the high cost of the raw material for synthetic rubber. And I don’t see the crude oil prices come down too much. It will hold in the region of US$73 per barrel. If that holds, rubber prices will also hold for sometime.

Our electronic industry is just performing at the same level. With no new investments, it is not creating new jobs. Especially with the rising living cost in view of increased petrol prices, electricity tariffs, it has helped fueled domestic inflation but real income has not increased. Still a large number of people are unemployed, particularly graduates. It is the region of 20,000 or so, and I am told it is more than 20,000.

Some say these people are unemployed because of mismatch (of skills), they can't respond to the demands of the employers because they don't possess the kind of skill or educational qualifications that their employers demand. But whatever it is, we are not creating enough jobs. In the agriculture sector, it is slow in picking, that's why it's not helping. Like I said, economically we are okay, but for other new activities I suppose we have to wait till the end of the year.

* The prime minister has just announced the Southern Johor Economic Region project.

I don't know whether this is the right thing to do because Khazanah Nasional Bhd was set up to look after the investments of the government, but now they are taking a pro-active stance going into urban renewal, housing and whatever. Is that what they're suppose to do? I thought we have gone through the privatisation phase and therefore it should be left to the private sector to undertake this. Probably, we don't see the plan clearly - I don't see (the government) is going to invite private sector involvement in the development in southern Johor.

We think Khazanah should confine itself to the management of existing investments of the government rather than going to venture into new things like undertaking this very big project. But then again, I don't know whether this (project) is going to help the development of the country in line with the New Economic Policy. Who is going to participate in this - not just building but also owning those properties? If Malays are going to be left out, it will create political dissatisfaction in Johor again.

* How's that?

The development from Johor Baru right to Kluang - a lot of things undertaken were snapped up by foreigners, namely Singaporeans, Taiwanese, to the extent that the locals not having the opportunity to own any of these properties. The Malays can't match the ability of the foreigners who come in with their expensive dollars (against) our devalued ringgit. Naturally, we can't match what they can spend. The Malays are going to be marginalised, that is our concern. We have to re-examine all this and see where this is going to lead us.

But Johor is an important part of the region because it's very close to Singapore. Whatever happens in Singapore, Johor should complement. But we must also make sure it will not cause political disruption within Malaysia itself. When you undertake this development, you want a stable society and we want a fair proper distribution of wealth among the people of various races, no one should be deprived or marginalised in the process.

* What about the new policies of Abdullah's administration - the focus on agriculture and the Free Trade Agreements (FTAs) with Japan and United States?

To begin with, I have not read the provisions in the FTA - even Asean (free trade agreement) - although the salient features were published but I am not privy to (the full text). So far as Asean agreement is concerned, I think it is just points for actions, is not to be implemented yet, they are going to have more discussion between Asean and the United States. In our case, I think we have move ahead and talk about having a free-trade arrangement with the US, but the point is are we in a ready position to embrace US? They are very advanced.

We have been fighting them on the WTO (World Trade Organisation) front, on invisible trade, services, banking, which we think if we allow this to come through, not just us (but) many other countries, will be swamped by the big giants. We are going to lose jobs because they are going to bring their people here, the services provided by the industry here cannot compete with them, we are going to be deprived. That's just one aspect, what about other aspects? Can we compete with them? If we open the door, they are going to swamp us.

Like the arrangement with Japan, we are going to export vegetables, what kind of vegetables? We are even importing vegetables from Sumatra, Thailand, so what vegetables are we exporting? What kind of cars are we importing? (The cars) have got bigger values, what amount of vegetables we are exporting? It doesn't make sense.

But then again, I have not seen the full text of the agreement. We are afraid of (losing) jobs. Even in America, they are also concern of job loss when they outsource because it's cheaper to get things done in developing country. Can we fight these advanced countries? I am not saying we shouldn' t. We should be prepared for it ultimately but are we ready now? We can ape them but up to a point, we must make sure our people are protected.

* Judging from the scale of the 9MP projects, some people suggested the government is running out of money.

We have cut down our income tax rate to 28 percent that means a loss of revenue. It was 45 percent, so that's substantial loss. We have done away with a lot of duties, that's also a loss of revenues.

* Mahathir has been saying we have Petronas money. Is it proper to use that money for national development?

You can't spend all of that. Remember in the 70s, 80s, our currencies were very strong, RM2.30 to US$1. We can buy one Singapore dollar with RM0.98. I used to get RM0.68 for one Deutsche mark which is equivalent to about one euro today, but now is over RM4. Imagine the devaluation of our ringgit. I think it is because of our excessive spending which caused the weakening of our balanced of payment, especially in our current accounts - too much outflows, don't have strength.

If we go on spending, the value of our assets will go. That's why Singaporeans, Taiwanese come here to buy things because they are half price, cheaper. Must we allow this to happen? I mean we like foreigners to come here to participate in our economic activities but not to an extent it is going to be a sell-out.

We build all the beautiful houses, condominiums and we should let our people enjoy and own these things at the right value. We can't allow people to just come and take. It's very hard for us to resist also because they offer dollars, there is temptation for us to let go. If the currency value is right and strong, people won't come, they will think twice before buying properties here, for instance, we won't go to Singapore to buy properties.

We must be managing the economy carefully. Even as ordinary citizens, we have a limit to spending, we can't keep on spending till we are in debt. Same thing with Petronas, even though they may have a lot of money, but they must think of the priority - education and healthcare, the two important things. When I was the finance minister, I made sure these two things are looked after - at least 40 percent of the budget - and then security.

There is a limit in spending but we shouldn't hold on to the money, or just because we are in deficit, we should cut here, cut there. No, I don't think so. We must continue spending, so people can go about in their daily businesses but it has to be reasonable. We can't just spend Petronas money or EPF (Employees Provident Fund) money. EPF is trust money, same with Tabung Haji, can't just take and spend.

* People in the business community complain there are not too much economic activities going on.

Our economic is strong, fundamentals are right, otherwise we won't be getting trade surpluses running into billions of ringgit. We are doing very well but if we rely purely on forced savings like EPF, very soon we will be in trouble. If we are strong fundamentally, why can't we borrow? We have good credit standing. We can borrow provided we use that money to finance productive projects. They can bring returns, not in dollar and ringgit sense, but more graduates.

We are talking about Vision 2020, we are not developed yet, still far, far away. We may get the concrete blocks up, but here (pointing at his head)? Have we developed here? We afraid of this and that, OSA (Official Secrets Act) here, OSA there. That is not developed status.

* So the government should do away OSA?

I am all for it.

* Internal Security Act?

You want to keep it in view of terrorism and all that but you must have qualification. Things have changed, situation changed, you don't have communism anymore, you want to use it against your political enemies? I don't think so. The UUCA (Universities and University Colleges Act) should go also. You are talking about fighting corruption; you must get rid of OSA.

* How do you rate the government's efforts in combating corruption.

OSA should go first.

* What about Abdullah's successes in fighting corruption in the last three years.

Only two (prominent individuals) arrested, plus three minor politicians, so there is no more corruption in the country? Corruption has not gone down but has increase instead.

* Is that because Abdullah lacks political will?

I don't know, I am not accusing him but I am saying generally.

For a better context on the state of our country’s economy and prospect check the FEER posting at


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