Illicit Capital, Illegal Trade and Inequality – Kleptocracy in Malaysia

                                           

By kleptocracy in Malaysia we shall mean the present government exists to accumulate and increase the personal wealth and political power of its ethnocratic officials and the ruling class of oligarchs and crony capitalists at the expense of a manipulated population. The accumulation of personal wealth, completed without pretense of any honest service but practiced corruption, is often achieved by looting the national wealth through extensive exploitation of natural resources often with the participation of government-linked corporations and oligarchies. Then, there are export incomes in the form of economic rents resulting in capital flights, and even illegal trading resulting in transferring public funds into secret personal numbered bank accounts in foreign countries.

An ethnocratic governance is where representatives of an ethnic group is holding a disproportionately large number of public posts to advance their ethnic group to the disfranchisement of others, (see Winter, J.A., Oligarchy, Cambridge University Press, 2011 and Wade, G., The Origins and Evolution of Ethnocracy in Malaysia, Asia Research Institute, National University of Singapore, Working Paper Series 112, April 2009).

In the case of Malaysia, the oligarchy consists of wealthy individuals with political influence constructing public policies benefitting their agricultural estates (for example, Felda Global Venture Holding) or business firms (YTL Power, NAZA Automotive Manufacturing, the Petra Group’s Elastomer Technologies Ltd., the Ananda’s TGV Cinemas); lucrative government contracts (to MMC Gamuda KVMRT (PDP) Sdn. Bhd. in the Klang Valley Mass Rapid Transit project, and to Cahaya Mata Sarawak Berhad (CMS) a contract covering all state roads maintenance in Sarawak totally over 4000 km. and a 15-year concession to maintain 643 km. of federal roads (Cahaya Mata Sarawak Berhad, Annual Report 2008, p.20)); and protectionist measures (as like Sapura-Kencana in the oil and gas sector or Dewan Niaga (Sarawak) monopoly on all timber exports) while displaying no remorse for the marginalized Malaysian. Often, these oligarchs are served and encouraged by crony capitalists who have close relationships between businesses and the ruling power.

A recent example of crony capitalists intending to leech on state fund is the Metropolitan Commuter Network to build and operate a 100-km inter-city rail service in Johor – a 60:40 joint-venture between Malaysia Steel Works (Masteel) and KUB Malaysia Bhd. where 70% is financed through a government soft loan. Masteel said it is a private sector initiative, but it is surprising that a company with no experience in operating a commuter train got an idea of building such a system even before the government called for bids, unless its close connection to the ruling party is a fact.

Another damning episode is the national airline Malaysian Airline System (MAS) when it was under private crony-capitalist control. Mahathir in the nineties privatized the carrier, selling a one-third stake to well-connected corporate high-flyer, Tajudin Ramli.

However, when MAS performance was unimpressed it was re-nationalized as part of a corporate rescuse package. Tajudin later claimed that Mahathir had induced him to buy MAS (at RM$8 when the trading price was RM$3.50) so as to bail out Bank Negara after the central bank suffered massive foreign exchange losses due partly to foreign currency markets’ speculation in 1997. This crony-capitalist said that as a “national service”, he initiated an “Overriding Agreement” to indemnify him against any loss suffered.

With typical lack of transparency, accountability and dire details of the consequent court proceedings, a RM$580 million out-of-court settlement was reached with some government-linked corporations that were claiming MAS for their outstanding dues.

Once again, capitalism has imposed deprivation of the underlying population which not only depleted the national wealth but hand over handsomely amounts to unworthy and unmeritorious oligarchy’s entities.

Since 2002, the Ministry of Finance, Malaysia, had absorbed RM$7 billion of the Malaysian Airline System’ assets. Already in 2005 and again in 2009, MAS had called for right issue raising nearly RM$3 billion in cash calls that inadvertently increased Khazanah Nasional Bhd’s holdings in the airline to 69.5%. The recent planned third rights issue of another RM$3.1 billion had critics debating whether the airlines can take-off and fly without government support, (see Francis, I., “MAS turnaround getting the brush”, The Edge December 3rd. 2012, pp.42-43).

In late 2011, the government investment arm, Khazanah, announced a surprise share swap agreement between Air Asia and MAS in a move reportedly aimed at boosting the income-generation of the national carrier. The deal did not go through, (KiniBiz, 6th. September, 2013).

As an argument, the MAS and Air Asia Bhd. collaboration effort – that was eventually called off – involved a RM$1.1 billion share swap, the question arises as to whether a radical overhaul in the airline is possible presently because an internal audit had exposed irregular procurement practices in the engineering division besides the existing loopholes in its contracts with various crony-capitalist vendors that are gainful to them rather than to the corporation itself.

Besides, the Air Asia entrepreneurship business model is very different from the archaic and ethnocratically-run government-linked corporations:

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Therefore, it is not unexpected through the years that at least 23 of Malaysia’s biggest companies are regarded as “special vehicles” for the United Malays National Organization (UMNO) receiving huge amount of money in government contracts because these companies are hard-wired to the crony capitalists’ principles of moral conduct of mass exploitation – a monopoly structure of production that is state and crony-capitalist owned – thereby undermining rakyat-rakyat aspiration of sharing wealth equally, (see Gomez, E.T., Politics in Business: UMNO’s Corporate Investments, Kuala Lumpur: Forum, 1990).

In Sarawak, as the Chief Minister, the Taib’s family oligarchs exploits the biodiversified forests with Sarawak’s largest timber and logging companies (Ta Ann, Samling, WTK, Sanyan) while maintaining concurrent monopolistic control in the log exports via Achi Jaya Transportation, besides other commanding plantations’ interest in Sarawak Plantation. Achi Jaya Transportation and Achi Plantations are subsidiaries of Aichi Jaya Holdings in peninsular Malaysia belonging to one Onn Mahmud, a crony capitalist to the Taib family since 1980 when the latter assumed office as the Chief Minister of Sarawak. In 2007, Japanese tax authorities revealed that tens of millions US dollars had to be kick backed to Onn Mahmud’s Achi Jaya Transportation otherwise the Sarawak government would not issue timber export permits, (The Japan Times, 29/03/07).

The confidential cable from the U.S. Embassy in Kuala Lumpur to the State Department dated 13th. October 2006, had noted in a report that “Taib and his relatives are widely thought to extract a percentage from most major commercial contracts – including those for logging – awarded in the state”. Unsatisfied with present wealth looting, in 2010, the Minister for Land Development, James Masing had declared a mission to convert a further 1 million hectares (2.5 million acres) of tropical forest into oil palm plantations by 2020 and that there would be a need for a “more aggressive development of Native Customary Rights land”.

The accumulation of wealth by this ethnocratic regime is detailed in an exclusive press release in 2011 by the Bruno Manser Fund indicating that the Taib family’s family connection has over 400 companies in 25 countries, including offshore finance centers such as those in British Virgin Islands, Jersey, Bermuda and the Cayman Islands. In peninsular Malaysia, Taib is a major shareholder of Mesti Bersatu Sdn. Bhd. which is a parent company for another 10 Malaysian companies with interests in the property, plantation and construction sector.

Indeed, the US embassy’s Political Section Chief concluded after a visit to Sarawak’s state capital in 2009, that: “the Sarawak State government remains highly corrupt and firmly in the hands of its chief”. In November 2009, the US embassy reported to Washington that “Chief Minister Taib remains unchallenged after 27 years in office, his government doles out timber-cutting permits while patrolling the under-developed state using 14 helicopters, and his family’s companies control much of the economy.”(Wikileaks leaked cable between US embassy Malaysia to the State Department Washington. Labeled – Confidential Section 01 OF 03 Kuala Lumpur 001935. Subject: Sarawak: Opposition adrift; Indigenous people lack services; police reject criticism. Classified by: Political Section Chief Mark D. Clark for reasons 1.4 b, d. Published 29.08.11, Viewed 06.08.12).

Illicit outflow of funds could be due to illegal capital that occurs when money is illegally earned, transferred or spent. It was stated that such sum amounting to US$285.24 billion (RM$872.8 billion) existed from our country between 2001 and 2010 (Global Financial Integrity, Washington 2012), earning Malaysia a dubious second ranking next to China.

However, some have argued that there are reasons for these leakages.

Such outward funds could be from PETRONAS or Setia or Genting “investing overseas” or, according to Bank Negara Malaysia “20% of illicit outflows were accounted for by unrecorded transfer of proceeds via informal channels” that is typically captured by the Errors and Omissions (E&O) of the Balance of Payments (BoP) or it could be due to “trade mispricing”, according to the Royal Malaysian Customs Department, where evaded customs duties could be in cases of under- and over-invoicing of exports and imports of goods, as well as phantom shipments and other falsification of the value or quantity of shipments, (the Global Financial Integrity 2010 Report, however, had indicated the loss of tax revenue in percentage of government revenue at 15.4% due to trade mispricing, between 2002-2006). Whatever the defied explanations, this is still a huge sum of money of nearly RM$175bn not re-invested in the country for the benefits of Malaysians during that period. It was also recently reported by GFI that Malaysia had lost RM$150 billion in illicit outflows in 2009, (http://www.mole.my), and RM$200bn by 2010.

On the other hand, one could also possible say that some of the unlicensed money remitting services in Malaysia is alleged to have been a part of a US$6 billion (RM18.3 billion) online money laundering operation in US operating under the Liberty Reserve entity. That payment could have been made but not officially declared is typically classified under black, shadow or hidden economy which could include illegal activities such as the drug trade, and other unmeasured activities of a shadow economy which in Malaysia, between 1990-1993, constituted 38%-50% as percentage of our GDP, much higher than Singapore’s 13%, but comparatively similar to Tunisia and Mexico experience, (see Hindriks and Myles, Intermediate Public Economy, Chapter 16, MIT Press 2006 and Hindriks, J., Keen, M., and Muthoo, A. (1999) “Corruption, extortion and evasion.Journal of Public Economics 74: 395-430).

According to The Tax Justice Network (2011), “The Cost of Tax Abuse – a briefing paper on the cost of tax evasion worldwide”, the size of the shadow economy in Malaysia is an estimated US$73481 million which resulted in the shadow economy as a percentage of health service at a high figure of 110% that if minimized could allocate and distribute better healthcare to the marginalized Orang Asals in Malaysia.

However, some of the larger outflows of funds were already in existence during the 1980s when the emergence of a bigger public and corporate debts as a consequence of capitalist cronyism (seeCronyism and Capital Controls: Evidence from Malaysia”, Journal of Financial Economics, vol. 67(2), pages 351-382, February 2001) where Simon Johnson and Todd Mitton provide empirical evidence for Malaysia that the imposition of capital controls during the Asian financial crises benefitted primarily firms with strong connections to Prime Minister Mahathir, again without any improved collateral performance when compared with other firms).

Other examples of political favoritism are also well expressed by Jomo and Gomez (in Malaysia’s Political Economy: Politics, Patronage and Profits, 1999) when they documented official status awarded to firms that are run by crony Malays, and also those informal ties that exist between leading politicians and firms that are run by the capitalist class of Malay and Chinese thereby immiserizing the working class.

Hence, we have to ask whether private-enterprise economy can work better in a redistribution of wealth and income toward greater equality? This country has wide ranging natural resources and abundant talents, and had once lived through good periods of unprecedented growth and progress. However, the growing share of the society’s income tend to accrue to corporations (especially oligarchies) and wealthy renters (especially crony-capitalists) while the share of the underlying population stagnates or even had declined substantially in the past few years.

It is not surprising then that in the recent Fitch Report stated that “Malaysia’s public finance are its key rating weakness” as during the first quarter of 2013, the government-guaranteed debts off-balance sheet had already amounted to RM$147.7 billion which means that in total the national debt presently is RM$656.6 billion.

The Fitch Ratings also highlighted that the government-guaranteed debts have increased from 9% of the GDP in year 2008 to 15% of the GDP in year 2012. This also means that overall our national debt would now be more than 65% of the GDP. This figure indeed is really way above the ceiling of 55% as set by Parliament.

In fact, the Malaysian Institute of Economic Research further had this to say on its web-site, “Financial stability needs to be preserved, as risks are building up, especially with high level of household debt and increasing federally-guaranteed debt of Government-linked companies (GLCs).”

The GLCs are in league with the oligarchs and crony capitalists in siphoning wealth from the nation, and when they failed, often are ‘renationalized’ at considerable public expense. GLCs are defined as companies that have a primary commercial objective but by which the ethnocratic governance – through Khazanah Nasional Bhd – has a direct controlling stake especially in making major decisions like awarding contracts, financing, acquisitions and divestments.

Gomez and Jomo (1999, op.cit) and Gomez (2002) had indicated the relationship-based capitalism where there are close connections between business and politics in Malaysia confirmed by the previous cited Johnson and Mitton (2003) research, too. Indeed, it was the increasingly dependency on debt financing before the 1997 instable economic conditions as the key domestic factor that pushed the country headlong economic downward to the distress of many a rakyat in the country, (Suto, M. (2003), “Capital structure and investment behavior of Malaysian firms in the 1990s: A study of corporate governance before the crisis”, Corporate Governance: An International Review, 11, pp. 25-39). It is even more revealing that Malaysian firms with political patronage – besides a positive link between political patronage and capital structure – tend to carry more debt, too, (Fraser, Zhang and Derashid, C. (2006), “Capital structure and political patronage: The case of Malaysia”, Journal of Banking and Finance, 30, pp. 291-1308;see also: Wei, K.T. & Hooi, H.L.,“Capital Structure of Government-linked companies in Malaysia”, Asian Academy of Management Journal of Accounting and Finance, Vol.7, No:2, pp. 137-156, 2011.

In partner state Sabah, Malaysia’s former Foreign Minister Musa Aman and brother Anifah Aman, Chief Minister of Sabah, are alleged to be the secret beneficiary of lucrative timber licenses in the state’s dwindling Forest Reserves with a financial cost of malpractices equivalent to RM$285m. On 12th. June 2012, Swiss public prosecutor was asked to charge UBS over laundering of some Sabah logging corruption proceeds when in early April 2012 bank statements had shown that Musa Aman’s sons had accessed “dirty money”.

Timber trader Michael Chia (Tien Foh) was arrested in Hong Kong and charged with money laundering (through CTF International which though registered in the British Virgin Islands on April 18, 2006, it was de-registered in 2008) as he attempted to smuggle SG$16m. to Malaysia in 2008. Chia was stated to be linked with Anifah Aman though the latter had denied any of the allegations surrounding this case, (sarawakreport.org/2012/04).

This Chia guy has three offshore companies in which he is listed as either director or shareholder. Besides CTF International, the other two offshore companies owned by Chia are Ravenswood Development Ltd. and Ark Capital Technologies Ltd. Further, Chia’s wife Yap Loo Mien and another woman, Yap Siaw Lin, also appear on the list as key shareholders in 3 separate British Virgin Islands entities.

Yap Loo Mien owned two companies – Perfect Minds Incorporated and StarWater Corporation, while Siaw Lin (rumored to be Chia’s mistress) owned Splendor Success Worldwide Ltd.

Meanwhile, in another part of the world – another research-study unfolds.

On the 19th floor of a skyscraper at 3 Lockhart Road in Hong Kong’s Wan Chai district, a company was alleged to receive at least €36 million from an offshoot of the French defense company DCN. Terasasi Ltd is indeed an enigma company.

The 19th floor’s main tenant is a company called Union Alpha, the Hong Kong arm of an accounting firm that provides “professional services to meet clients’ daily business needs, both in Hong Kong, Greater China and globally,” including auditing and assurance services, management consulting, accountancy and other services, according to the firm’s website.

Terasasi, however, is at the center of allegations that at least some of the €36 million was funneled through its accounts to Malaysian Prime Minister Najib Tun Razak as a commission on the sale of two Scorpene submarines purchased from the French defense company Thales International, also known as Thint Asia.

It seems that two directors (initially Terasasi was incorporated in Malaysia, but listed in the Hong Kong Companies Registry later) are Najib’s associate, Abdul Razak Baginda who was once head of the Malaysian Strategic Research Centre, and Razak Baginda’s father, Abdul Malim Baginda. The former was at the center of a 2006 investigation into the death of Mongolian translator, Altantuya Shaariibuu.

At the Paris Tribunal de Grande Instance, the French investigating magistrates Roger Le Loire and Serge Tournaire are enquiring the sale of the two Scorpene submarines to Malaysia. It was disclosed that a company Perimekar Sdn. Bhd. received another €114 million as a commission on the sale of the vessels, from an offshoot of Thales and DCNS known as Amaris. Perimekar at the time was wholly owned by another company, KS Ombak Laut Sdn Bhd, which in turn was also controlled by Razak Baginda and his wife, Mazalinda. Perimekar is now 20 percent each owned by the Armed Forces’ Superannuation Fund LTAT and Boustead Holdings.

(A subsidiary of Boustead Holdings, Boustead Naval Shipyard Sdn. Bhd. had recently received an amended letter of acceptance from the Defense Ministry for a RM$9 billion contract to build and deliver six second-generation patrol vessels with combatant capabilities for the navy (Business News, The Star, 2nd. October 2013)).

The magistrates have documents that show that the money was funneled from Thint Asia to Terasasi — €3 million when Terasasi was still domiciled in Malaysia, and €33 million after it was incorporated in Hong Kong. There is no indication at this point where the money went. French investigators, however, theorize that it was part of €146 million that may have been funneled to officials of the United Malays National Organization and Najib, who traveled with Abdul Razak Baginda several times to France as defense minister at the time the country purchased the submarines from DCNS. (An earlier scale model of the original proposed submarine can be seen inside a glass-case in Galeria Seri Perdana, former residence of Mahathir in Bukit Damansara; the former prime minister’s dedicated kitchen to make loaf bread can also be visited, and be sighted).

According to the French news agency Agency France Press the probe by the French investigating magistrates involves three contracts for the submarines which were signed on June 5, 2002. Also according to the documents received, the contracts had two components: the sale of two submarines built by Thint and the Spanish shipbuilding firm Izar, for €920 million; and the delivery of “logistical support” from Perimekar Bhd (amounting to €114 million) to train the first batch of 200 Royal Malaysian Navy personnel.

The contracts cited by AFP included the €114 million amount paid by the Malaysian government to Perimekar. The second, called “C5 contract of engineering business,” was concluded in August 2000 between DCNI, a subsidiary of DCN, and Thales International Asia valued at €30 million. The third was the “consulting agreement” signed in October 2000 between Thint Asia and Terasasi.

The French investigators, while studying one of the invoices issued by Terasasi in August 2004 for €359,450 sent to Thint Asia, expressed that, “it appears that… the amounts paid to Terasasi ultimately benefited Najib, the defense minister, or his adviser Razak Baginda.

According to the proceedings in this case, the French authorities say Terasasi apparently received regular payments from Thint Asia, including one for €360,000 that was accompanied with a handwritten note saying “Razak wants it to be paid quickly.” There is no indication if the Razak in question was Najib Tun Razak or his friend, Razak Baginda.

A lawyer with Solitary Human Rights Group, Breham was engaged by the Malaysian reform NGO Suaram, had indicated that DCNS often budgeted between 8 to 12 percent of its total receipts as “commissions” to grease hands in third-world countries. Breham said Perimekar had received the commission for “supporting the contract,” which he said was a euphemism for unexplained costs, and also for “housing the crew” of the submarines in France.

Further, a confidential memorandum made available to Asia Sentinel (see also: Kua Kia Soong’s article in http://www.freemalaysiatoday.com) states that: “The beneficiaries of these funds are not difficult to imagine: the family clan and Razak Baginda relations. In addition, these funds will find their way to the dominant political party (UMNO).

In Malaysia, capital flights can even be flown out by the Prime Minister. Between 2010 and 2013, this ethnocrat spent RM$86.4m for his private jets with an addition of RM$16.5m. on maintaining them. In addition to the cost of private jetting, a whopping RM$42 was spent annually on the Prime Minister’s foreign trips since 2008. Besides the Prime Minister’s jet, the country has six other VVIP executive jets for official use by the Yang di-Pertuan Agong, Deputy Yang di-Pertuan Agong, and the Deputy Prime Minister “to carry out official businesses of the nation”.

Some of these official businesses are not necessarily towards national diplomacy bonding because the government had admitted that Najib made a ‘private trip’ to Milan despite concealing the destination when asked in Parliament. His official Royal Malaysian Air Force plane Perdana One [pix here: http://www.airliners.net] – an Airbus 319-115X(CJ) registered as 9M-NAA – flew to Milan from Washington on the 20th of May, 2012 and stopped at Dubai before returning home, all tracked by http:/flight-radar-24.

On this particular trip alone, his two-day plus stays in London and New York cost the Malaysian taxpayers RM$849,175 and RM$1,606,402, respectively, while his remaining days spent in Washington was another whooping RM$452,985.

The other spendrift ethnocrat is Sarawak Chief Minister Taib Mahmud. Sarawak’s Taib is known for his immense wealth and string of assets – he is calculated to worth US$15bn. outstripping Malaysia’s richest capitalist tycoon Robert Kuok who has US$12.5bn., (Forbes, 2011) – by abusing his position not only as the Chief Minister of the state, but also as the State Finance Minister, and Planning and Resources Minister whereby these three ministries controlled 50% of the state’s operating expenditure of RM$1.2bn, and 80% of the state’s development expenditure of RM$3bn while the other ten ministers share the 20% balance. He is often seen travelling in a Rolls Royce, sporting a designer suit, wearing a walnut-sized ruby ring, and while at home residing in a well-guarded palace-like mansion in Kuching. “I have more money than I can ever spend” once telling his deprived rural populace in 2010.

Capitalism has not changed nor reduce inequality anywhere, more so an ethnocratic corporatism residing in Malaysia, thus confirming Marx’s view that relative amiseration of the rakyat would more than likely increase under crony capitalism.

Associate Professor Syed Farid Alatas of the Department of Sociology at the National University of Singapore presenting on a forum Eradicating Corruption: How Successful Have We Been? that the Malaysian political system is a systemic practice of corruption embedded into the state and politics – where corruption is the dominant means of doing business. Indeed, the major kleptocrats are not the mid nor low-level civil servants who extort or accept bribes but those high-level politicians-cum-crony capitalists and ethnocrats who engage in corrupt activities as means of accumulating capital while suppressing the poors from improving their livelihood.

The World Bank and the International Monetary Fund had assisted to underwrite for decades the many deceits committed by corrupt regimes. The World Bank’s limited focus on corruption ignores the much larger problem of transnational-border dirty money crossing. Whenever money that is illegally earned, illegally used or illegally transferred whether these are criminal proceeds from drug trafficking and racketeering, commercial proceeds from transfer pricing and shady business transactions, they are often hidden in tax havens. In fact, Western businesses and banks have facilitated and sheltered this type of dirty money for years. It is stated that for every One Dollar the western nations distributes in assistance across the table to the developing countries, they take back some Ten Dollars in illegal proceeds under the table to be transacted and reprocessed in the various developed countries banking systems, (Baker, R., Capitalism’s Achilles’ Heel, John Wiley, 2005).

Black Market Crimes in Malaysia

Total country Black Market value: US$2.99 Billion

Alcohol Smuggling:                           $268 million

Ecstasy Price:                                   $16.0 per tablet

Heroin Price:                                    $8.88 per gram

Human Traffickers Price:                 $6,588/person

Methamphetamine Price:                 $52.7 per gram

Book Piracy:                                     $9 million

Counterfeiting:                                  $772.5 million

Cigarette smuggling:                          $200 million

Counterfeit Pesticides:                       $19 million

Gas and Oil Smuggling:                      $175 million

Illegal fishing:                                     $334 million

Movie Piracy:                                       $36 million

Music Piracy:                                        $23.5 million

Software Piracy:                                   $657 million

Prostitution:                                          $963.8 million

Video Game Piracy:                               $28 million

see also Haken, J., “Transnational Crimes in the Developing World”, Global Financial Integrity, 2011.

Indeed, some top Malaysian politicians, and their families, use offshore secrecy in Singapore and the British Virgin Islands, according to some recent leaked documents available to our research team. These files were obtained from the International Consortium of Investigative Journalists (ICIJ).

According to some of the finer details from the leaked documents accessible to the Study Team on Rakyat-rakyat Malaysia, they show that Raja Nong Chik, who is the Lembah Pantai UMNO chief, is a shareholder and director of RZA International Corporation, a British Virgin Islands entity incorporated on Aug 21, 2007, through Singapore. The company is a mirror of Malaysian entity Kumpulan RZA Sdn Bhd, a 1979-founded company dealing in real estate and equities investment. Raja Nong Chik set up the offshore entity with his father, Raja Zainal Abidin Raja Tachik, a number of his sisters and brothers as well as other family members. Most of them are also shareholders and directors of Kumpulan RZA Sdn Bhd. Though RZA International was de-registered in 2009, the former Federal Territory Minister did not elaborate on the offshore investments made by his family through the company, emphasizing that the entity was “not used to circumvent taxes nor hide (….or obscure) transaction overseas.

Illicit capital accumulation, and its subsequent outflow allowing crony capitalists and families to buy mansions and duplexes in Vancouver and Dubai, has deprived re-investment in home country resulting in sub-standard roads and inadequate water and electricity supplies in Sarawak and Sabah, fragmentation of natural forest cover, inequality in the national economic development with the ensuing disparity in income distribution and within the education system (Jomo. K.S. and Wee C.H., Malaysia @ 50 – Economic Development, Distribution, Disparities, Strategic Information and Research Development Centre, 2013).

A capital-endowed society with present economic uncertainty and unstable social environment a larger cohort of the corporatized world of oligarchies and their crony-capitalists shall still depend upon an ethnocratic government procurement of their goods and services. Some mega-projects may now be suspended, and though some capitalist producers of government demand may endure, the impact of government service provision to the poor and needy may be more socially burdensome – even unaffordable or unavailable soon, too.

This comes at a times when the nation is split by racial income differentiation (see chart below), and the appropriate narrative should be about a class structure argument – that the ruling class of oligarchs are distancing themselves from the oppressed working class and the agricultural peasantry favoring the crony-capitalists on the control and domination of the national economy with close-in-hand operation with the ethnocratic ruling power.

While income inequality has fallen generally from an average around the gini coefficient of 0.50 in the 1970s to around 0.45 since 1987, there has been little to no significant improvement since [look at the blue nation-wide line in the chart], (cf Snodgrass, D.R., (1980), Inequality and Economic Development in Malaysia, and Shireen, M.H. (1998), Income Inequality and Poverty in Malaysia; the Gini coefficient, also known as Gini index or Gini ratio, is a measurement in statistical dispersion where a Gini coefficient of zero denotes perfect equality whence everyone has an exactly equal income whereas a Gini coefficient of one expresses maximal inequality).

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Though the income gap ratio between urban and rural in 2009 is about the same level as in year 1989, but in absolute terms, the income gap had in fact widened considerably. Indeed, it had jumped three times during the same period. Further, the gap between the rich and the poor had also remained wide. Despite the huge resources allocated towards rural development and for the poor, the income ratio between the rich and the poor, and of the peasantry population and the urban mass, has not changed much post 1990s.

The economic superstructure contradictions still persist.

In fact, the liberalization and privatization of the economy after the mid-1980s has resulted in widening inequality since 1990, (Ragayah, H.M.Z., “Income Inequality in Malaysia”, Asian Economic Policy Review, (3), pp. 114-132, 2008); and agreed by Dr. Muhammed Abdul Khalid, a research fellow with Universiti Kebangsaan Malaysia,

http://www.themalaysianinsider.com.

If we are to further assume household wealth within a class structure analysis then the distribution of wealth is even more skewed than those of income. In fact, the distribution of wealth – classified as real estate assets as they make-up of 96% of Malaysian categorized household wealth – indicates that the top 10% of Malaysian households per capita control 35% of the country’s wealth, while the bottom 40% owns a meager 8%. (Khalid, M.A., “Household Wealth in Malaysia: Composition and Inequality among Ethnic Groups”, Jurnal Ekonomi Malaysia 45(2011), pp.71-80).

According to the UNDP 1997 Human Development Report, and the 2004 United Nations Human Development Report, Malaysia has the highest income disparity between the rich and poor in Southeast Asia, even more acute than those in the Philippines, Thailand, Vietnam, Indonesia and Singapore. The UNHDP Report displays that the richest 10% in Malaysia controls 38.4% of the economic income as compared to the poorest 10% who controls only 1.7%.

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That corruption had enabled the illicit outflow of capital with illegal means of business trading as the typical operations by crony-capitalists and the oligarchies; this should be viewed as a weapon of mass destruction of the impoverished poors. These are crimes of the state against its people.

However, an ethnocratic government enmeshed in the culture of “ketuanan” often refused to accept an authority being questioned, but is it not that the rakyat is the master as the public elects the politicians into office, and the civil servants are the servants of civil society? Therefore, the rakyat-rakyat are the tuans of the politicians and public servants.

We shall conclude by expressing pointedly that kleptocracy is a government of thieves, by thieves and for the thieves. The kleptocracy mode of governance only expands the oligarchs and ethnocrats on their personal wealth and political power by stealing from the state’s coffer. Kleptocracy maintains its political power by dividing our beloved population along tribal, racial or religious lines through the ethnocratic culture of domination (Balasubramanian, R., “The Culture of Domination” and “Ethnocracy and the Culture of Domination” in juristmalaya.com, 2013); see also Hazis, F.S., “Domination and Contestation: Muslim Bumiputera Politics in Sarawak”, Institute of Southeast Asia, Singapore, 2011).

The finality of the Shah of Iran’s regime was not portrayed by the photo of the Shah fleeing Iran but by a photo of six dead, naked generals of the SAVAK lying on the damp concrete floor of a morgue in Teheran.

Reference:

 Biagioli, A., “Financial crime as a threat to the wealth of nations. A cost-effectiveness approach.” Journal of Money Laundering Control, 2008. 11(1): p.88-95.

Bruno Manser Fonds (2012), The Taib Timber Mafia – Facts and Figures on Politically Exposed Persons (PEPs) from Sarawak, Malaysia

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