Towards structuring economic development with sustainability

Collective on Geoeconomics

28th February 2023

For a long time it seems – more than two decades – since Olin Liu’s IMF Report is there a structural approach to national economic development that is more strategic and formative in dealing with politico-economic realities faced by the nation in totality.

An analysis on a previous attempt in structural reform under a stagnated economy was explored HERE.

1] THE BUDGET 2023 will allocate RM388.1 billion for spending, of which RM289.1 billion is for operation expenditure and RM99 billion for development expenditure – once again amplifing the dire direction state of nation is heading. Only 25% in budgetary allocation is devoted to sustain developmental endeavours, whereas three-quarters of expenditure are to service day-to-day operations or for every ringgit, 75 sens go to maintain and retain the civil service sector and its pensionable remunerations.

[In the 1960-70s, nearly half of a National Budget is devoted to development purposes towards long-term returns on investment, covering widely upon education, socio-economic services and the health segments]

Whereas, nowadays, the national debts are increasing as a resultant outcome of continous high operation expenditure with consistent budget deficits since 1998:

The public sector, through the decades supporting the dastard nature of kleptocractic practices, has not met the performance criteria deemed a necessity to spur economic development, but furnished as an intermediary medium between political master and to rentier capitalism in vested projects’ implementation. Some elements have even aligned with the political kleptocrats and clientele capitalists in helping themselves in gorging unfetted gains.

Not infrequent harsh critique of an ethno-administrative regime is the poor performance of the civil service, its sluggish deliverance of public goods and services, slackness in work productivity, and widening misuse of public funds – as observed by the World Bank consultation teams:Over the years, various efforts have been undertaken to improve public sector productivity in Malaysia, but not unsurprisingly, with limited resultant outcomes. Core difficulties often lie in translating researches on public sector productivity findings into policy actions. The elements constraining effort on improving public sector performance centre on administrative human-resource incapacity, a broadbase corruptive regime with burden of privileges mentality, a lost community soul living in a society laced with serial systemic odious practices, including  money-laundering, (read icij, Panama Papers).

The Pandora Papers exposè only widen the mired state of nation politico-economic praxis wherein RM$1.8 Trillion is siphoned abroad by corrupted compradore capitalists and their clientel ethnocapital; this amount is even more than the national debt of RM$1.5 Trillion in 2022!

Singapore has one time or another has a SG$1.57 Trillion in sovereign reserve while
Norwegian Sovereign Wealth, accumulated since exploitation of North Sea oil – about the same time that Malaysia started exploration of oil and gas off South China Sea – is a stacked US$1.2 Trillion.

Thus, the country has an outsized public sector which is imperfect in its non-productiveness  (reference: World Bank (2019), Malaysia Economic Monitor: Re-energizing the Public Service).

All the above issues are aided and abetted by neoliberalism capital endowment in the guise of foreign advisors to dash any hope of an indigenous contribution to proper economic development but an economic growth praxis that engulfed a state of nation crises after crises with subservient subsidies mentality and those consistent provision supports that inhibit an alternative mode in uplifting the development of a country.

2. THE REVENUE for 2023 is projected to be RM$291.5 billion compared to RM$294.4 billion last year; the nearly +RM$90 billion shortfall is to be covered by debts financing and dividends from Petronas and Khazanah, plus tax base which is already too pit-bottom shallow. (The T20 segment makes up 80% of Employees’ Provident Fund (EPF) contributions; out of 16-million workers, only 2.5 millions are tax-payers).

The deferment in implementation of the capital gain tax and a wealth tax until 2025 only indicate the preference to capital interests than immediate rakyat-rakyat beneficial wellbeing. There is a definite need for reforms towards long-term fiscal sustainability if governance is committed to improving the credibility of the fiscal policy conduct and framework through more holistic reforms which should include revenue enhancement measures and subsidy rationalisation programmes  while maintaining macroeconomic stability and safeguarding the wellbeing of the rakyat.

Unfortunately, the social assistance allocation of RM$8 billion to cover the needs of 8.7 million people will amount to a paltry RM$920 per person per annum, (theedgemarkets, 27/02/2023).

Listen to Treasury Secretary General Datuk Johan Mahmood Merican on the thought process that went into drawing up the budget HERE.

3. THE ECOFOOD SECURITY issue is inadequate in tackling daily bread-and-butter problems by not prioritising the maintenance of open and operational food supply chains. Equally in importance is to address other looming threats to food security including climate change that is already damaging food production as temperatures and precipitation patterns fluctuate. Further, the wide-spread urbanisation has caused a proportionate decline in the agricultural labour force as the current cohort of farmers age and fewer young people are interested in taking their place.

Therefore, the country’s land-use practices in catering large-scale agribusiness and real-estate development are unsustainable, especially with introduction of considerable imminent deforestation, loss of biodiversity, and chemical pollution. 

Given these challenges, agricultural research and development (R&D) must be a core component of any national food security policy. Climate-focussed research is also needed to develop the various crop varieties that are tolerant against a more uncertain climate and extreme weather events. More appropriately – in any quadrilateral helix operational approach mode (with distinctive articulated strategic goals) – there is a need for a strategic reorientation in the ability to resolve present and future food scarcity by collaborating with international bodies and countries to mitigate the ecofood insecurity issue, (BowerGroupAsia, 2023).

4] THE NATIONAL DEBTS shall slow the economy growth path for many years to come; it could likely be seized upon by the oppositions ahead of state polls and could dilute the credibility of the Anwar governance, so said BowerGroupAsia senior analyst Arinah Najwa.

Further, economists do not expect the nation’s strong economic growth witnessed in 2022 to continue into 2023 as consumer pessimism weighs significantly on growth which is affected by Global North consumption patterns and the cosmopolitan centres’ inflationary trends. Indeed, many economists believe that domestic consumption will slow significantly by end-2023 due to cumulative inflationary pressure, the waning effect of the Employees Provident Fund’s special withdrawal scheme that was imposed in April 2022, and the expiry of the car sales tax exemption. This could be further impacted by the government’s potentially more restrictive spending as operational expenditures enlarged, (see the report in FitchSolution in Appendix).

5]   THE MEDIUM-TERM FISCAL FRAMEWORK

For 2023, UOB Kay Hian Research foresees gross domestic product growth halving to about 4 per cent due to a slowdown in domestic consumption in the country in alignment with IMF’s projection. Under the Medium-Term Fiscal Framework (MTFF) 2023-2025, total revenue in the medium-term is projected at RM854.3bil or 14.7% of gross domestic product (GDP), mainly contributed to non-petroleum revenue which is estimated at RM699.5bil or 12% of GDP.

The fiscal policy in 2023 will definitely need to maintain agility, supporting the growth momentum towards achieving the national development agenda. The fiscal resources have to be channelled through a more targeted approach and allocated in priority areas, particularly to enhance economic capacity and country’s competitiveness.

While the government’s budget remains expansionary to provide sufficient fiscal support in ensuring the rakyat’s well-being, the continue undertaking of premier economic reforms has to be sustained to maintain the fiscal consolidation plan. This is more vital since the Federal Government’s revenue collection in 2023 is projected to be lower at RM272.6bil or 15% of GDP due to anticipated lower non-tax revenue collection. The non-tax revenue is expected at RM$67billion, declining 23% from 2022 due to lower dividends from government entities.

6] THE SME ENTREPRENEURSHIP

A positive way is to emphasis more on the quality and multiplier effects in creating high quality jobs and building key ecosystems to help the development of local capitals and specifically SME entrepreneurship players.

The SMEs are the backbone of Malaysian economy:

The small and medium enterprises (SMEs) make up 99% of the 920,624 business establishments in Malaysia. In 2018, SMEs employed 66.2% of the workforce in Malaysia, contributing RM$522.1 billion, or 38.3%, to the Malaysian GDP. They are classified into three categories: micro, small, and medium, defined by industry, sales turnover, and the number of employees. Micro-enterprises make up 76.5% of Malaysian SMEs. In contrast, medium-sized enterprises comprise only 2.3% of SMEs.

Despite being the backbone of Malaysia’s business environment, “SMEs perform relatively poorly in digitalization. There exists a digital divide among businesses in Malaysia”, write Amos Tong, an economics undergraduate at UCLA, and Rachel Gong, a researcher at the Khazanah Research Institute in Kuala Lumpur. This owes to the fact that the larger pool of micro-SMEs entrepreneurs are marginally unskilled and too underfunded in their enterprises’ administration and daily operations; compounded that there are much to do Catching Up:
Inclusive Recovery and Growth for Lagging States in Sabah and peninsula Malaysia which needs wider spread-effect from economic development, (World Bank, 2022).

Related to the bigger picture is the question as to in what ways can the SMEs contribute to the industrial development programme in the country.

How would the New Industrial Master Plan 2030 in the third quarter of 2023 shall emerge has a bearing on cementing the future industrial platform of a nation and what intermediary roles would the SMEs play in the commodity supply (and value) chains?

Shall we revisit the E&E sector to tap upon the peripheral benefits in the West vs China-Korea-Japan Chip War? or we might got submerged within the geopolitical trade-technology warfare?

Can we generate the next generation of New Gen armed with TVET, but without adequate polytechnic knowledge nor polycrisis management skills to confront future geoeconomic scenarios?

Owing to the diverse array of activities in SME and different genres of entrepreneurship, whatever assistance offered may not be enough to aid this vital segment of the national economy. LISTEN to Chin Chee Seong, National Secretary General of the SME Association of Malaysia on his takes.

7] THE DIGITAL FRONTIER

Shall we go boldly forth to seek new frontiers where everyone has been before but got net-meshed in a monopoly-capitalised infrastructural platform foundation?

In the Malaysia Economic Monitor, February 2023, the World Bank is rather persistence in advocating the advancement towards a digital economy.  Though while advocating Big IT development as a means of continuing capital deployment – and capital accumulation with extracted value from states – to ensure Global North infrastructural platforms Big Tech benefiting on expansive exploitation, through global labour arbitrage where underemployed labour is truly exploitated, (read  STORM, 2022, Big Tech Large Gig), and STORM 2023, Big Tech in Marine Cabotage where the infrastructural platforms could hold our nation to technical ransom on undersea communication cabling installation and maintenance.

Indeed, the large RM$1.5 billion IT allocation will benefit only wealthy and the well-connected companies – not our local SMEs entrepreneurs – with their huge expenditure for consultancy pservices.

It also highlights the longer term on how to rebalancing towards deregulated finance and foundational service sectors (like infrastructural platforms which are incrementally becoming invasive as techno-feudalism in country) franchised by privatisation and outsourcing to Global North monopoly-capital whereby compradore capital accumulates their capital as functioning intermediaries.

Related readings herein: Financialisation Capitalism Digital Feudal Lords

8. THE PETRONAS AND KHAZANAH FACTORS

A good prospect is to spur local start-ups, government-linked companies including Khazanah Nasional Bhd and EPF in investing RM$1.5 billion for those that are innovative and have high-growth potential. This model will see a lead company (not as yet identifiable, but capital shall continue to dominate as Jomo observed in a French Embassy-sponsored forum)  that shall partially or fully take over the operation of TVET institutions and revamp training programmes so that they meet industry needs: provisio it is free from identity politics but based on Madani politico-economics mantras.

Inheriting such a burgeoning debt burden, sovereign wealth fund  Khazanah  Nasional Bhd could sell its assets to raise cash for the state of a nation as she is sitting on assets easily worth more than US$30.5 billion  (December 2021) that could probably raise over 10% of the government’s +RM$1.5  trillion debt and contingent liabilities.

Another financial resource bulwark is with Petronas as it is financially in a comfortable position to pay, given that its total assets has strengthened to RM$699.5 billion in the first half of 2022.

Alternatively, government-linked companies (GLCs) and government-linked investment corporations (GLICs) would also likely be encouraged to pay higher dividends. The government could tap these state enterprises to help out just as like the recent RM$58 billion stimulus package to counter impact of the Covid-19 pandemic 2020 crisis. The GLCs and the crown-jewel GLICs have to be reformed to endow the national coffers.

An excellent yet viable alternative foundation is the formation of a new sovereign fund to be created with Khazanah and Petronas seedings.

The debt financing of a national economic development shall demands certain structural changes, (see Appendix B). The mere fact that much resistance to change by clientel-capitals to inhibit every rakyat-rakyat to have a share of the common wealth only befalls the stake – and sake – of a nation.

9] THE DEBT FINANCING DIMENSION

With government revenue projected to remain low and  structural expenditures still increasing high, this has led to further narrowing of Malaysia’s fiscal space (see right chart below):

Using the ratio of the Federal Government Debt to the revenue collection as a reference point, the World Bank has indicated that Malaysia’s fiscal space has gradually narrowed since 2012 and became tighter post-pandemic. 

The government also expects revenue to decline over this period, from 15 percent of GDP in 2023 to an average of 14.7 percent in 2023-2025. Overall, the fiscal deficit is expected to consolidate at a gradual pace with the overall balance averaging at 4.4 percent of GDP for the  MTFF period.

The current fiscal consolidation strategy – via spending reduction – is, to many national economists and political analysts, (bfm.my, IDEAS, O2 Survey, theedgemarkets),  rather challenging, given the current tight spending domain. Firstly, the combined spending on structural expenditures is already at high levels; and secondly, other Operating Expenditures components such as supplies and  services, and grants and transfers have been on a declining trend or are already at low levels.

Thirdly, the Unity Governance has inherited a legacy of lackadaisical administrative performances by preceding regimes who had mangled, looted, overturned legitimate-elected government, siphoned off national coffers at a time when the nation is in deep sovereign debts, weakened by commodity supply chains in a semi-deglobalised environment and with the world economy growth marginal though inflationary trend is cooling:

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10] CONCLUSION

The Budget does not provide details as to how subsidy rationalisation will unfold, other than the already increased electricity tariff for large corporations. The reduction in subsidy expenditure seems to be primarily attributable to the lower oil prices (as compared to 2022). As a nation, we are on a neo-colonial dependency development mode, and always, on subsidy dependence to crawl ahead.

With neoliberalism economic policies as the preferred approach since independence , we are but without shared common prosperity nor progressive elements of developmental governance ethos or a new ideal socialist praxis  referencing an equitable distribution of social wealth. The preferred economic growth model is still undermining, and underdeveloping, the country’s economic developmental full potentialities.

In short, if development in Malaysia is to be self-directed and comprehensively inclusiveness, then traits of such a “developed society should also embrace secularisation, commercialisation, increased social mobility, increased material standard of living and increased education and literacy besides such things as the high consumption of inanimate energy, the smaller agricultural population compared to the industrial, and the widespread social network” (Syed Hussein Alatas, in a paper presented at the Symposium on the Developmental Aims 1996, pp 70-71).

There is not much leeway to manoeuvre in an inflationary-inflicted terrain, and a heavily indebted and morbid economy, but the nation has to be reformed boldly to sustain a growing developmental path that is wealth-sharing with opportunities for all.

APPENDIX A

FitchSolution Assessment

APPENDIX B

Structural Changes

APPENDIX C

Inequality and Class

The persistent question on Race and Class, Poverty and Inequality dimensions are succinctly explored HERE, with referenced links and video contents.

An extracted excerpt is expressed herein :

Post May 13, 1969, the country’s growth policies have shifted from strategies with an emphasis purely on economic growth toward a strategem focusing at combining growth with income inequality reduction between ethnic groups. This policy shift was formalized in the New Economic Policies (NEP) for the period 1971–1990 (see Economic Planning Unit, various years).

The relationship between economic growth and ethnic diversity (Agostini et al., 2010, Gören, 2014,

Iniguez-Montiel, 2014)  is supported by a body of economic literature that finds that ethnic heterogeneity induces social conflicts and violence, which in turn, affects economic growth (see Easterly and Levine, 1997,  Mauro, 1995,  Montalvo and Reynal-Querol, 2005). 

The negative consequences of ethnic diversity imply that adequate policies are required to ensure that the benefits of any economic growth are equally shared among all ethnic groups.

Unfortunately, six and a half decades plus downstream, the politico-economic mission objectives have yet to attain that vision reality. The 2022 budgetary version is just as bad as previous years’ The Budget and the Buffons:  misallocating rare resources as well as accentuating the dominance of ethnocapital over rakyat-rakyat labour. The continuance of an neoliberalism economic approach post-independence only restrains the forward thrust in engendering a truly enduring national developmental effort.

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Expanding Malaysia’s Digital Frontier – Deepening Infrastructural Platform strongholds

20/02/2023

1] WORLD BANK

Over the past 50 years, according to the World Bank, the country has successfully reduced extreme poverty and promoted shared prosperity. Yet, in its Multidimensional Poverty in Malaysia : Improving Measurement and Policies in the 2020s Report, it has identified – through the Multidimensional Poverty Index (MPI) on which preceeding ruling regimes introduced in the national development plan for 2015–2020 – that more avenues are still required for improving the relevance of the MPI in policy discourse by setting deprivation thresholds of the various MPI dimensions (health, education, living conditions, income) at levels to be more appropriate for an upper-middle-income country such as Malaysia.

The country’s goal to attain high-income and developed nation status while ensuring that shared prosperity is sustainable is yet to be fully realised. Indeed, the research studies completed by Khalid et al have indicated the glaring disparity between the 1% populace and the rest of rakyat2.

And that, despite the surge in economic nationalism since the Guthrie Dawn Raid and the completion of the New Economic Policy (NEP), the foreign ownership and control of a national economy is rearing, and maintaining, its neo-colonial domination once again:

Even the differentiated disparity in economic performance between peninsular and the Borneo states is acute:

with sparse budgetary allocation to enable better education, and eventual enhanced human capital enrichment:

Just as the per capita income gap between the Global South and the Global North has quadrupled in size since 1960, in what can only be described as a striking pattern of divergence.

This should not be a surprise since the World Bank is often regarded as an organized agency of U.S. imperialism.  The policies that the World Bank has espoused in the name of ‘globalization’ and ‘development’, in the guise of ‘international cooperation for development’, have advanced the interests of powerful economic and political interests within the U.S. imperial state rather than the world’s poor.

Oftentimes, the immediate consequence is the high debt-to-repayment ratios endured by lower-income developing countries often mired in perpetual debts borrowed from its sister entity – the International Monetary Fund or IMF:

This trend is due in large part to power imbalances in the world economy. To put it simply, rich countries have influence when it comes to setting the rules of international trade and finance – and they tend to do it in ways that serve their own economic interests, quite often at the expense of everyone else – and the World Bank is leading in this neoliberal capital-dominated thrust in the economic imperialism pack.

On all projects as undertaken by the World Bank/IMF consultancy, there are always ‘conditionalities’ imposed on borrower countries where loans are based on what is termed the ‘Washington Consensus’, focusing on a neo-liberalization practice in trade, investment and the financial sector and the deregulation and privatization of nationalized industries. Often the conditionalities are attached without due regard for the borrower countries’ individual resulting in the loss of a state’s authority to govern its own economy because national economic policies are predetermined under the World Bank and its International Monetary Fund packages, and where most developing countries hold little voting power. These “packages” have also been associated with negative social outcomes such as reduced investment in public health and education, but still have sufficient capital expenditure beneficial to local compradors and industrial-capitalists as well as monopoly-capitalists globally.

2] INFRASTRUCTURAL PLATFORMS

In the Malaysia Economic Monitor, February 2023, the World Bank is rather persistence in advocating the advancement towards a digital economy. Not unfamiliar with big projects – from the Sungai Muda Dam during an era of “green revolution” to various projects to develop ports and highways presently, this entity is only continuing with advocating Big IT development as a means of continuing capital deployment – and capital accumulation with extracted value from states – to ensure Global North infrastructural platforms Big Tech benefiting on expansive exploitation, through global labour arbitrage where underemployed labour is truly exploitated, (read STORM, 2022, Big Tech Large Gig), and STORM 2023, Big Tech in Marine Cabotage where infrastructural platforms could hold a nation to technical ransom on undersea communication cabling installation and maintenance.

Continuing with a brief assessment of Sarawak economic development deficiencies in a previous survey, World Bank has already identified the state’s HR potentialities are gearing towards IT knowledge breakthroughs.

However, the entrepreneurship among the state’s ruling class is only sustaining capital accumulation, but not common wealth sharing, yet.

Then, the World Bank Report 2022 stating that with the inadequacies of IT implementation in the Sabah, the state of Borneo has to be promoting faster – and wider – deployment of IT development where Global North monopoly-capital and local compradore capital shall profit from the many infrastructural platforms’ implementation.

Not de-emphasising that it is a fact that our high-speed broadband accessibility is considerably more expensive compared to other countries, (read also  storm’s Digital Knights).

According to a study on internet access affordability in 2021, people in Malaysia had to pay 26.58 U.S. dollars per month on average for broadband internet access. Meanwhile, the cost of mobile data per 1GB was at 0.45 U.S. dollars per month, (data as released by Statista Research Department, 28/9/22.

Further, Malaysia ranked 74 out of 167 countries in terms of price per Mbps for fixed broadband services, and 64 out of 118 for fiber broadband services – way behind regional peers such as Singapore and even Vietnam.

It is this emergence of a new business model of large monopolistic firms on digital platforms that are capable of extracting immense amounts of data overwhelming legacy enterprises and suppressing labour empowerment, (Paul Langley and Andrew Leyshon, Platform capitalism: The intermediation and capitalisation of digital economic circulation, 2020) that should be a concern to the Unity Governance on the role of “netarchical capitalism”, where infrastructure is “in the hands of centralized privately owned platforms”, (Nick Srnicek, Platform Capitalism, 2017); see also STORM 2022, Techno-Feudalism arising -and acting much like the Dutch East India company – are these IT aristocrats reshaping society detrimental to our marginalised poors.

3] ECONOMIC PERFORMANCE

Malaysia’s economic growth is projected to expand by 4.0 percent in 2023 amid an expected slowdown in external demand. This follows a stronger-than-expected recovery of 7.8 percent last year. Malaysia’s strong performance in 2022 overall was due to the sizeable withdrawals from the Employees Provident Fund (EPF) which contributed to higher private consumption in Malaysia than in other countries.

In addition, improved labour market conditions, other government policy measures such as the increase in the minimum wage and cash assistance programs such as Bantuan Keluarga Malaysia provided additional support.

Recovery is broad-based across firms and sectors. The results from the Business Pulse Survey (BPS) in August 2022 show recovery becoming more entrenched following the reopening of international borders.

Firms of all sizes and across all sectors achieved positive changes in sales relative to the same period pre-pandemic. Nonetheless, it is still the large corporations specfically the transnational corporations (TNCs) that are leading the way in sales growth.

Recovery remains uneven with poor and vulnerable groups, especially the small manufacturing enterprises (SMEs) experiencing slower recovery. 

The 3rd round of the World Bank’s High-Frequency (HiFy) Phone Survey showed that nearly 70 percent of lower-income households self-assessed themselves as having inadequate financial resources to meet their monthly basic needs, and more than 60 percent of these households reported having no savings. Recent increases in food and energy prices have further exacerbated the lingering effects of the pandemic on poor households.

Rising food and utility prices have contributed to the uptrend in inflation.  Consumer price inflation in Malaysia stood at 4.0 percent in November 2022 (October: 4.0 percent) while core inflation was estimated at 4.2 (October 2022: 4.1percent).

In addition, the upward trend in inflation was also driven by higher utility prices. Relative to regional peer countries and around the world, inflation has remained broadly stable in Malaysia, mostly due to blanket fuel subsidies and price controls.

However, the increase in government spending during the COVID-19 crisis to support the economy has raised debt levels and reduced Malaysia’s fiscal space. Therefore, the near-term focus should be on supporting the vulnerable and rebuilding fiscal buffers.

Efforts to rebuild fiscal buffers should be driven by higher revenue collection and better spending efficiency. An effective policy response should enhance the consumption tax framework, broaden the tax base of personal income tax, and streamline reliefs, (read STORM 2023, Financing Debts).

The fiscal management is of great concern because it was reported that as a nation, we have US$57,566,000,000  of international debts in 2021, according to the World Bank collection of development indicators on  International Debt Securities: translated as two hundred fifty-three billion two hundred ninety million four hundred thousand Malaysian Ringgit Debt or RM$7,449 per rakyat owing.

Meanwhile, a gradual shift towards a targeted subsidy framework would help subsidies work better for lower-income households. A move toward targeted subsidies is required. 

Putting in plans to phase out blanket, broad-based subsidies and moving towards a more targeted subsidy framework that would benefit lower-income households is relevant and timely. A depreciating ringgit could increase the cost of living but could also be favorable for economic growth. 

Analysis on the effects of ringgit depreciation shows that it could increase the cost of living as the price of imported goods and services in the consumer’s basket rises. However, a depreciating ringgit could also be favorable for economic growth through an increase in the country’s international competitiveness and net exports.

There is an ongoing need to better understand and properly measure poverty and inequality. This is so that responses and policies can be rolled out more effectively and equitably. 

The government is currently considering an update of its poverty line income and multidimensional poverty index. This is not only timely but also important to improve poverty measurement to a standard commensurate with Malaysia’s current living standards and state of development.

The completion in execution of a perfecting performance within a short time frame by the Unity Governance is commendable.

Related Readings

Debts Financing towards Progressive Economic Development

Subservient to Subsidies

Debts Financing towards Progressive Economic Development

20th February 2023

1] INTRODUCTION

As global growth is likely to decelerate sharply to 1.7 percent in 2023 synchronous with policy tightening, worsening financial conditions, and continued disruptions from the Russia near-border conflict, the activity in Emerging Markets and Developing Economies (EMDE), excluding China, is forecasted to slow from 3.8 percent in 2022 to 2.7  percent in 2023 on account of weaker external demand and tighter financing conditions.

2] STATE OF NATION

With government revenue projected to remain low and  structural expenditures still increasing high, this has led to further narrowing of Malaysia’s fiscal space (see right chart below):

Using the ratio of the Federal Government Debt to the revenue collection as a reference point, the World Bank has indicated that Malaysia’s fiscal space has gradually narrowed since 2012 and became tighter post-pandemic. 

The government’s medium-term fiscal consolidation  plan is guided by its Medium-Term Fiscal Framework (MTFF). Under the latest MTFF for 2023-2025, the government has adopted from the previous MTFF estimate, based on a projection that nominal GDP will expand by an average annual rate of 5.5 percent, and that the average price of crude oil will maintain at US$90 per barrel. As with the previous MTFF, the current framework pursues an expenditure-driven fiscal consolidation, (see chart above: left side).

The government expects operating  expenditure to decline from 15 percent of GDP in 2023 to around 14.5 percent over the MTFF period.

The government also expects revenue to decline over this period, from 15 percent of GDP in 2023 to an average of 14.7 percent in 2023-2025. Overall, the fiscal deficit is expected to consolidate at a gradual pace with the overall balance averaging at 4.4 percent of GDP for the  MTFF period.

The current fiscal consolidation strategy – via spending reduction – is, to many national economists and political analysts, rather challenging, given the current tight spending domain.

Firstly, the combined spending on structural expenditures is already at high levels; and secondly, other Operating Expenditures components such as supplies and  services, and grants and transfers have been on a declining trend or are already at low levels.

Therefore, the  government’s current fiscal consolidation plan would have to include a higher revenue collection target.

Through preceeding regimes’ gorging and siphoning – and depleting – of national wealth, whereupon revenue level has remained low and is still trailing comparative peers. It is more than ever importantly to address the persistent decline in revenue collection and explore new sources of revenue, more so under an inflationary trend that affect every poor people of the low-incoming developing countries.

3] SOURCES OF DEVELOPMENT REVENUE

A) Sovereigns can borrow from within their own country or from abroad.

Domestic borrowing – from local banks and asset managers or directly from households (EPF employees’ money or PNB owners’ saved trust units) could likely be a steady and reliable source of financing. However, there is a limited amount of money available and repayment maturities tend to be short. Not infrequently, governments also borrow from international capital markets, in larger amounts and usually at longer maturities. 

Otherwise, there is a wide and diverse range of private sector entities willing to lend to sovereigns, too. Asset managers, such as pension funds, typically hold a large amount of government debt. They need relatively safe long-term assets to match their long-term liabilities.

B) In big ticket projects, they have been financed typically through government budgets, either from tax revenue or from government borrowings, some had often been financed through special-purpose vehicles (SPVs) — for example, DanaInfra, which was set up to raise financing for several infrastructure projects. The debts of these SPVs are guaranteed by the government, and hence, can be considered ultimately as government debt.

Many public infrastructure projects have also been privatised, and the private investors would recover their cost of investment through collecting tolls or charges from the users. Examples of these include the toll roads, independent power producers and land-swap projects. In such cases, the government does not carry any liability for these projects unless it has given some form of revenue guarantees to these private investors. This financing model (using private-sector finance and project development expertise) is known as a public private partnership (PPP).

Not often publicised is another variant of PPP, where private investors recover their cost of investment through payments from the government. This is generally known as a private finance initiative (PFI) which has its many odious transactions. PFI payment obligations comprise a large proportion of the PPP debt of RM$201.4 billion, which was only known, and later announced, by the preceeding government in May, 2022, (read PFI, 2022).

C) Inevitably, instead of borrowings that incurred interests, a progressive way is to implement a windfall tax on industries that benefit greatly during the Covid-19 crisis, according to Khazanah Research Institute senior advisor  Professor Dr Jomo Kwame Sundaram.

“This is precisely the time when you must reform taxes as you have it (windfall tax) all the time amid extraordinarily high petroleum prices or palm oil prices.” 

This is concurred by Institute of Malaysian and International Studies research fellow Dr Muhammed Abdul Khalid who pointed out that policy-makers tend to ignore the imposition of capital gains tax when it comes to the issue of tax reform.

Even Bank Negara Malaysia (BNM) assistant governor Dr Norhana Endut noted that the government’s tax collection capacity had not kept pace with the economic growth.

Indeed, Malaysia tax to gross domestic product (GDP) ratio, has been on a steady decline over the medium term. It fell to 12% in 2019 from 15.6% in 2012.

Further, Malaysia’s individual income tax also continued to come from a narrow pool of taxpayers. For instance, in 2018, among a labour force of 15 million people, only 2.5 million were taxpayers!

There is a definite need in expanding the tax base be a priority over the medium term, besides existing tax incentives and exemptions should be reviewed on a regular basis as some of them are outdated and ineffective, affecting the beneficial economic development among the marginalized poor’s.

This is also during an era of inflationary trend. Global inflation is expected to fall to 6.6 percent in 2023 and 4.3 percent in 2024, still above pre-pandemic levels, thus socio-economic impacting heavily on the B40 rakyat².

According to Richard Record, one-time the World Bank Group’s lead economist for Malaysia, the country needs to raise more revenue and spend it more effectively. “Malaysia, of course, benefits from having oil and gas revenues as a source of non-tax revenue, but these have tended to be quite volatile,” he tells The Edge.

Present revenue collection is low mostly because rates are low and there are so many allowances and exemptions. Reforming the SST (Sales and Services Tax), and in particular sharply reducing the number of non-essential items that are zero-rated or exempted from.

Indeed, there should be greater effort across tax instruments: to increase the progressivity of personal income tax, re-examine the number and targeting of corporate income tax incentives and to consider new sources of revenue such as  environmental taxation  and capital gains taxation.

The introduction of capital gains tax, raising the tax rate for those in the top individual tax bracket and imposing a tax on retirement savings above a certain threshold were among the suggestions on how to enhance revenue in the World Bank Report, 2021.

If the present Government continues to borrowing – the interest rate has to be minimal – then it has to prevent the structure of such debts from becoming too risky. This is because, at one time, we find it cheaper to borrow in US dollars or euros than in our own currency. However, this finanancial method can cause problems if the ringgit depreciates because this increases the real burden of the debt – as was clearly exemplified proportionately in the 1MDB case:

D) Otherwise, it is to apply traditional methods like using Government bonds issued to finance budget deficits but with a glaring pitfall. If there is a continuous growth of debt, the private sector creditors may become concerned about the government’s initiative to repay it. Over time, these creditors will expect higher interest payments to provide a greater return for their increased perceived risk as it is widely acknowledged that higher interest costs dampen economic growth.

On the other hand, for Danaharta it uses cash to purchase loans from the domestic banking system by paying sharp discounts of as much as 50 per cent on a loan that was either collateralised by property or shares listed on the stock exchange.The consequence is too much liquidity in the matket, and the country went south can be partly identified to the solidification of financialisation capitalism (see: Southampton’s Lena Rethel  Financialisation and the Malaysian Political Economy.

The flooding of money in the market is not to generate wealth but within the circuit of financialization capitalism  components of FIREs (finance, interests, real estate) in furtherance of repaying mortgage loans, hire purchases, insurances, real estates tax dues and other debt interests.(Rajah Rasiah, 2011) has ambly demonstrated that with accentuated and expanded monetary instruments circulation, the national economy had impaired, through wide currency circulation, unfavourably:

E) Inheriting such a burgeoning debt burden, sovereign wealth fund  Khazanah Nasional Bhd could sell its assets to raise cash for the state of a nation as she is sitting on assets easily worth more than US$30.5 billion  (December 2021) that could probably raise over 10% of the government’s +RM$1.5 trillion debt and contingent liabilities.

Another financial resource lies with Petronas as it is financially in a comfortable position to pay, given that its total assets has strengthened to RM$699.5 billion in the first half of 2022.

Alternatively, government-linked companies (GLCs) and government-linked investment corporations (GLICs) would also likely be encouraged to pay higher dividends. The government could tap these state enterprises to help out just as like the recent RM$58 billion stimulus package to counter impact of the Covid-19 pandemic 2020 crisis.

4] PROGRESSIVE PATH PROCESS

From The Quest for Growth  (World Bank, 2016), and to Surge Ahead  (World Bank 2021), the country is still, catastrophically, mired and entrapped within  capitalism crisis to crisis in a struggle to Catching Up, (World Bank, 2022) among ASEAN peers:

To undertake an emancipatory project may necessarily has to migrate pass through various revolutionary socio-economic phases such the community-based projects of various scopes, scales and dimensions, (see chi-sigma, Towards a Socialist Community with Solidarity Involvement as one such possible undertaking).

To be successful, therefore, requires a commitment to a pulsating socio-economic change that seeks to make itself irreversible through the promotion of an organic system directed at genuine human needs, rooted in substantive equality and the rational regulation of the human social metabolism with nature.

In building an equity society with socialism as the dominant foundation, we must do all we can to develop the productive forces and gradually eliminate poverty, constantly raising the people’s living standards. Only when this outcome is achieved and there is significant prosperity for all will it become possible to begin the shift to advanced stage of an economy that is highly developed and where there is overwhelming material abundance. Only by this process that we shall be able to apply the principle of from each according to his ability, to each according to his needs.

To achieve this process, there is a need on genuine planning and genuine democracy where these are through the constitution of power from the bottom of society. It is only in this way that a progressive socioeconomic society, and its healthy and well-being domain, becomes irreversible.

Towards this process in striving the Socialism with Malaysia characteristics goal, there shall be a combination of planning and markets forming the basic socialist economic system. Second, we need to keep in mind the dialectical relation between ownership and the liberation of the productive forces that shall entail; thus

(1) the system contains a multiplicity of components, but public ownership remains the core economic driver, with corporate capitals supplementing capital formation but without undue surplus value extracted from labour; 

(2) while both state owned and private enterprises must be viable, their main objective is not profit at all costs, but social benefit that meets  ‘people-centred’ needs from appropriate shelter, education equity to community-base healthcare, adequate nutrient food, harnessing modern technologies towards social needs;

(3) it employs the primary socialist principle of from each according to ability and to each according to work, limiting exploitation and wealth polarisation, and ensuring common prosperity and wealth sharing for every rakyat2  wellbeing;  

(4) the primary value should always be ‘socialist collectivism’ – gotong royong  community-based than bourgeois individualism and inflicted neoliberalism ethos.

5 CONCLUSION

The emergence of such socialist democratic political practice shall embrace an organic unity of the components of socialist democracy which entails that the people are masters in, and within, the community supervising the servants of society through the socialist rule of law and the Federal institutional guarantees.

We need to be in the threshold of a new sovereignty re-imaging a New Malaysia positioning an entity adhering a New Narrative to perform New Politics for the generasi muda.

This is the moment of great re-imaging of the Malaysia nation and possibly the greatest challenging changes to be seen since independence gained. This is the basic starting point of all planning work and the tasks ahead.

This is that moment of the momentum of a movement.

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Related Readings

Reforming Malaysia’s Government Finances

Ramesh Chander, Murray Hunter, and Lim Teck Ghee

Towards a post-2020 Political Economy

Monopoly-capital Agribusiness scythes EcoFood Security

There is an agricultural and food production ecosystem that is inefficient, environmentally unsustainable and inequitable to every rakyat-rakyat in the country.

In 2021, the share of agriculture in Malaysia’s gross domestic product amounted to only 9.59 percent, manufacturing sector contributed approximately 37.76 percent and the services sector with financialisation capitalism dominates at 51.55 percent.

1 INTRODUCTION

Malaysia’s agricultural sector is strongly biased towards large-scale agriculture. The estate (plantation) sector is predominantly a producer of oil palm and rubber accounting for 60% of the country’s agricultural area. These estates are big – each individual unit commonly covering 2,000-10,000 hectares. Just in terms of national land occuptaion alone, oil palm planted area stood at 2.7 million hectares (ha) at the end of 2020, which is more than 20 percent of its land area. Therefore, fertile land in Malaysia that could be used to grow food is planted with palm oil to ‘feed’ the Global North need from cosmetics and as cooking oil to lubricants or as a biofuel, whilst the devils milk latex is oozed out of rubber trees to make tyres and gloves for the cosmopolitan western countries.

The country has so much land with a small population of +33 million compared with our ASEAN neighbours, and yet we have to import over RM$60 billion in food commodities annually to feed the nation. The farmers in the highly productive Bertam Valley in the Cameron Highlands would prefer to grow chrysanthemums for the Japanese market as they are a more valuable crop than vegetables for local consumption.

2 PLANTATION CAPITALISM

The land development schemes, started by the Federal Land Development Authority (FELDA), is managed like a feudal land-owner than as a co-operative, occupying 21% of the land.

Over 60% of land area is devoted to two main crops neither of which provides anything in the provision of daily food consumption for the Malaysian population. 

The remaining 40% is managed by family households on independent smallholdings of less than 2 hectares in size, and not all of these lands are used for farming – only 7.8 million hectares, according to the Food and Agriculture Organisation (FAO).

Though agriculture makes up 9% GDP and employs only 4% of the workforce, the surplus value of processed oilpalms and rubber is not accounted for rakyat2 consumption. Exports of natural rubber from Malaysia were valued at 1.1 billion U.S. dollars in 2021. Malaysia accounted for some 6.5 percent of global natural rubber sales that year, becoming the fifth largest exporter worldwide; in 2022, the export value of palm oil and palm-based products from Malaysia was valued at approximately  RM$137.89 billion.

During the British ‘forward movement’ of colonialism in the 1870s, the adoption of industrial farming transformed rolls of rubber sheets into pneumatic tyres or similar rubberized end-products in Dickensian-like factories in the United Kingdom, but enslaved migrant labour in her colonies. The indentured and kangani-recruited but marginalised South Indian plantation workers eventually became those Malayan “orphans of empire”.

By late twentieth century, industrial capitalism has not changed, but evolved into globalized capitalism that increasingly adopted a system of interlinked commodity chains controlled by transnational corporations, connecting diversified production zones, primarily in the Global South, with the high point of world finamce, consumption and capital accumulation mainly in the Global North. These commodity chains constitute primarily the circuits of capital globally that is identified as late imperialism with the rise of generalized monopoly-finance capital, see John Bellamy Foster, “Late Imperialism,” Monthly Review 71, no. 3 (July–August 2019): 1–19; Samir Amin, Modern Imperialism, Monopoly Finance.

Under this financial monopoly capitalism system, exorbitant imperial rents from the control of global production are obtained not only from the global labor arbitrage, through which (TNCs) transnational corporations with their headquarters in the Global North overexploit industrial labour in the periphery, but also increasingly through the global land arbitrage, in which agribusiness multinationals expropriate cheap land (besides labour) in the Global South so as to produce export crops mainly for sale in the Global North, see Intan Suwandi, Value Chains  (New York: Monthly Review Press, 2019), 32–33, 53–54; and STORM, Big Money, Big Farms, 2023).

3 Big Farms Little Gains

The country’s high stake in the agribusiness is dependent on monopoly-capital accumulation in oil palms and rubber extractive productions. Whereas, the agri-food entities planting cocoa, pineapples, coconuts and sugarcanes have sole entrepreneurship and state ownership, and are domestic market-oriented. 

A preliminary casual assessment on the challenges of these production ecosystem would include:

(i) low agricultural productivity,

(ii) imperfect competition, and

(iii) suboptimal utilization of technology and Research and Development (R&D). 

Furthermore, the overall labour productivity growth in the agriculture sector is negative (-1.7 percent) in Q1 2022 and well below the Malaysian average of 2.1 percent, on the back of low sector employment declining by 0.7 percent. 

Likewise, Malaysian agri-food companies are confronted by problems of reliable access to electricity with frequent power  outages; and an access to modern technology like broadband is often limited, leading to an obstacle to boost productivity and supply reliability because of tangled commodity exchanges.

R&D spending on the agri-food sector is low, and so is often regarded as the obstacle to boost productivity and supply reliability. With R&D spending on the agri-food sector being so miniscule, the adoption of new technologies, and even on improved process flows, is a hindrance to any advance ahead. The World Bank estimated that less than 15% of all firms are spending on R&D and to be internationally recognised with relevant qualifications and certifications to boost market segments penetration.

4 Agri-Food Security

With adherence to the neo-colonial praxis in financial corporatisation of large agribusiness plantations catering to metropolitan countries commercial needs, a country like Malaysia had neglected her domestic food security  concern so much that the country imports almost 100% of grain corn or two million tonnes annually from Argentina, Brazil and the US.

The local rice production has stagnated in the last thirty years and between 2016 to 2018, rice production actually decreased by 6.20%. As by today, Malaysia is importing between 30 to 40 percent of its rice consumption mainly from Vietnam, India and Thailand.

At a time when world economic situation is expected to become even more challenging in 2023 because energy crisis and food security are among the main economic threats, especially for developing countries. Even a developed country like Malaysia where agro-food import stood at RM$64 billion in 2022 or according to the Department of Statistics Malaysia (DoSM), imports of food accumulated to RM$482.8 billion over the last 10 years, while agricultural produce exports amounted to mere RM$296 billion. 

At the World Food Summit, it is expressed that food security shall only exist when all people, at all times, have physical and economic access to sufficient, safe and nutritious food. Food security must be seen in terms of availability, accessibility, consumption and stability. Physical availability means that food must be readily available, while physical accessibility means the food must not only be available but people must also have access to it.

However, Big Farms are in many ways undermining local and regional food security by buying up land and entrenching an industrial, export-oriented model of agriculture. In the process – with wide-spread circuitry of capital, the inadvertent existence of monopoly-capital – large transnational conglomerates are not only expropriating emerging economies their natural resources in an unequal exchange, but also inducing long-term environmental and social devastation as a  consequential ecosystem disaster.

5 Food-secure Initiatives

We are at a junction where some of the Ministry of Agriculture and Food Security’s (MAFS’s) flagship initiatives include the Smart-Sawah Berskala Besar currently focused on Integrated Agricultural Development Areas. 

Encouragingly, too, at the national and subnational level, are policies that enable environment, and complementary investments that have helped to steer and accelerate the digital transformation of the agri-food system.

At the national level, agricultures included under the National Fourth Industrial Revolution (4IR) Policy as one of the priority sectors. The application of 4IR technologies in the agriculture sector is expected – hopefully – to create the highest impact on the nation as a whole.

Some of the important policies undertaken by the present Unity Governance under the 4IR nclude:

(i) creating more local digital platforms enable-to the digital marketplace;

(ii) investing on basic infrastructure in rural areas to enable the  adoption of 4IR technologies;

(iii) establishing the 4IR agriculture technology application center and an agriculture facilitation fund to encourage the adoption of emerging technologies;

(iv) setting up-regulated co-investment trust fund to pool capital from the government and the private sector to invest in 4IR-related technologies;

and 

(v) providing tax incentives to encourage the adoption of 4IR technologies.

Indeed, at the sub-national level, in Sarawak, in line with the Digital Economy Blueprint, the state government has created an enabling policy and regulatory environment for digital platforms, digital entrepreneurship, digital payment systems, and digital skills.

There are even zones dedicated to high-profile technology parks for food crop production. 

Then, in Johor, the southern peninsula state is preparing the Johor Agrofood Policy 2021-2030 (DANJ), and to promote food security and digital technologies, it is leveraging a Smart Agriculture Zone (SAZ) and a Drones & Robotics Zone (DRZ) in the city of Iskandar. 

In conclusion, the focus-effort in fostering the adoption of technology,  innovation, and modernized management practices is the way to go forwards. It is a defined, and definite, necessity for the agri-food sector to improve its performance. In the past, Malaysia has done relatively well in developing new products, but its performance has fallen short in the of process improvements due to entrenched clientele capitalism, (STORM, 2021).

The environmental situation is further compounded by kleptocratic veiled vision to benefit false vested crony interests, thus suppressing real land reforms for the unsettled peasantry, (STORM 2016).

EPILOGUE

Under a bold endeavour, there shall be enhanced, community-based, common wealth-sharing approach, comprising:

(i) spatial and temporal considerations to guide future development,

(ii) consideration of changing diets and nutritional requirements, and

(iii) steps to improve national resilience

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Related Readings

Financialization of Global Agribusiness

Big Farms, Small Farmers

Cultivators and Capitalism

Place Position Power of Public Sector in Development of a Nation

Preamble

The Civil Service

A Roll call:
On the core public service sector, in 2019, the armed forces comprised 152,957 personnel; police had 128,536; civil servants of various schemes (665,068); education (523,226) and health (240,745).

On the Resistance to Change:
“It’s not too big“

The Factual Reality:
RM$55 billion was required to remunerate the 834,109 civil emolument bill for the 2019 expenditure

where the immigration officials, the police and the army — who fall under the Home Ministry — account for +300,000 civil servants and a RM$15 billion salary allocation. Together with teachers and medical personnel, these frontline service personnel make up about one million civil servants, nearly two-thirds of Malaysia’s then 1.6 million-strong civil service.

1 INTRODUCTION

Not infrequent harsh critique of an ethno-administrative regime is the poor performance of the civil service, its sluggish deliverance of public goods and services, slackness in work productivity, and widening misuse of public funds.

Over the years, various efforts have been undertaken to improve public sector productivity in Malaysia, but not unsurprisingly, with limited resultant outcomes. Core difficulties often lie in translating researches on public sector productivity findings into policy actions. The elements constraining effort on improving public sector performance centre on administrative human-resource incapacity, a broadbase corruptive regime with burden of privileges mentality, a lost community soul living in a society laced with serial systemic odious practices, including money-laundering.

2 On Service Productivity

There are indicators of its deliverance have declined since 2014 according to World Bank lead public sector specialist Rajni Bajpai. In fact, there was a very “big gap” in the performance of its civil servants with Organisation for Economic Co-operation and Development (OECD) countries.

At a time when the emoluments and the retirement charges of the public sector constitute 31.2% of the RM$372.340 million Budget 2023 announced on 7th. October, 2022 (which excludes contingency reserves yet-to-be disclosed) in the operating expenditure which are equivalent to the 32.8% of development expenditure for socio-economic programs and projects, including subsidies and social assistance – there is more than much concern on the performance and productivity of our civil servants.

This is heading a grueling question on total government debt and liabilities as of June 2022 which is estimated to be at RM$1.42 trillion and will rise further; indeed, it was announced on 17th. January 2023 that the national debt including liabilities has reached RM$1.5 trillion. Total debt and liabilities are already 82 per cent of GDP, (read STORM October 2022, Underdevelopment of Development – consolidation of financial monopoly-capitalism).

There are many problems, but these are some underlying issues where the performance of the civil service is ranked lowly in terms of accountability, impartiality and openness of the public sector.

i) In 2020, public servants accounted for approximately 10.2 percent of total employment in Malaysia. Personal emoluments as a share of total public expenditure increased steadily over the past twenty years, from 17.6 percent in 2002 to as high as 29.3 percent by 2017.

Source: World Bank (2019). Malaysia Economic Monitor: Re-energizing the Public Service; see notes ii) & iii) below:

ii) As a share of revenue, a review done by the World Bank in 2011 found that Malaysia was spending about 27 percent of its revenues on salaries and wages/personal emoluments in 2009, significantly more than in some of the higher-income countries it aspires to emulate such as Canada (13.7 percent); Norway (12.5 percent); Australia (10.6 percent); and South Korea (9.6 percent).

iii) By 2018, this percentage has increased to 34.3 percent for Malaysia, (see World Bank (2019). Malaysia Economic Monitor: Re-energizing the Public Service).

iv) “About 90% of the 1.2 million civil servants are Bumiputeras and the government does not impose any quota for the intake based on race or ethnicity” – a minister in the Prime Minister’s department, Abd Latiff Ahmad once told the Dewan Rakyat; the civil service employment dataset belittles that outlandish claim.

In 2021, the statistics were: 987,322 comprised Malays,  94,000 Sabah Bumiputeras,  73,190 Chinese, 60,031 Sarawak Bumiputeras,  47,994 Indians, 2,414 Orang Asli and 8,656 others.

v) In 2020, Malaysia ranked 57th out of 179 countries in the Corruption Perceptions Index (CPI). By 2021 the country’s CPI dropped further to 62nd place out of 180 countries.

By mid-2022, the SRI case had concluded with its final verdict in jailing the country’s premier; but the littoral combat ship scandal is ongoing, and the Private Finance Initiative liabilities are topping +RM$48 billion where the repayment fundings are from the Employees Provident Fund and Retirement Fund (Incorporated) or KWAP – the statutory body which manages the pension scheme for Malaysia’s public employees.

Then, there are still 105 PPP projects that required financial allocation from the national budget with an estimated cash commitment of +RM$98 billion.

[ public-private partnership (PPP) is a funding model for public infrastructure projects and initiatives such as new telecoms, public transportation, airport and power plants. Our Government agencies represent the public partner at a local, state and/or national level. ]

The Transparency International’s Global Corruption Barometer also finds that 71% of people in Malaysia “think government corruption is a big problem”.

This is the absolute abuse of high-level power that benefits the few at the expense of the many.

The Malaysian civil service is a patriarchal and rigid hierarchical organization, where privileged placing, positional status and accrued power are much more valued than creativity, and effective productivity whence it is considered threatening to outshine a superior at the rank of director and above. Indeed, the power-distance relationship in Malaysia is the highest in the world, (Hunter, 10/022023).

Nicos Poulantzas conceives a neo-Marxian concept of class and class processes when “places” are distinguished from class positions where “places” exist at each of the these levels of an organisational society: economic, political, and cultural levels where at the latter, social dominance regards a bumiputeras status as the premier preference.

3 A multi-dimensional approach is a possible way to improve public service performance besides understanding – and improving – upon public-sector productivity in the country.

A methodology may assume tasks such as these:

i) gather expenditure data as a starting point in examining budget execution rates, providing a baseline assessment on productivity variations focused on programs and activities undertaken by the Ministeries, Departments and Agencies (MDAs).

ii) then, by combining this information with other data such as project completion rates and administrative data from the MDAs, possibly allowing for a more granular look into productivity variances and how drivers such as ICT and digital technology, administrative capacity, training and development, financial and non-financial incentives can influence productivity levels

iii) then, there is a wealth of administrative data on the public sector, such as on budget-execution and project-completion, that can be used to undertake a deep-dive diagnostic assessment into how productivity varies across public spheres and organizations and what might be the drivers of their activities.

Hopefully, with such diagnostic assessments they shall assist in strengthening the conceptual framework around public sector productivity in Malaysia, identify areas around which future analyses and impact evaluations should focus, and highlight areas where measurement can be improved.

This is an extract from the World Bank 2019 Report on the challenges Malaysia has to confront to fulfill rakyat2 expections:

4 Can productivity performance objectives be executable or even achievable?

Here are some selective country case-studies and their resultant outcomes that can be learnt from:


a. Improving administrative human-resource capacity, by ensuring that public administrations are well staffed and have the competencies and resources to meet task demands. Basri et al (2021), for example, found that tax organizations in Indonesia that invested in improving their administration capacity (at a cost of 1 per cent of revenues) saw a 128 per cent increase in revenue collected.

b. Merit-based recruitment can ensure that public administrations are staffed with well-qualified and competent staff that are able to effectively complete their tasks, perform at a high standard and generate new innovations and ideas. Evidence from the Brazilian civil service demonstrates the effectiveness of competitive examinations at entry for screening quality applicants (Dahis et al, 2020).

c. Improving management practices can have large impacts on public-sector productivity, as public sector managers make decisions over the allocation of resources (both physical and human) and how to incentivize and motivate staff. For example, Rasul and Rogger (2016), studying the Nigerian civil service, find that management practices in public organizations significantly influence productivity, measured in terms of project-completion rates. Recent evidence highlights the effectiveness of training, mentoring, and consulting interventions for improving the quality of management in organizations (McKenzie and Woodruff, 2020).

d. Implementing GovTech solutions in government can help significantly reduce costs by improving information flows, such as in the case of e-procurement (Lewis-Faupel et al, 2016); and by improving monitoring systems, leading to a reduction in fund leakages, corruption and poor performance, such as in the case of e-financial management tools (Banerjee et al, 2020) and technologies for improved monitoring of teachers and healthcare workers (Duflo et al, 2012, Callen et al, 2020).

e. Financial and non-financial incentives can motivate staff to reach and maintain a high level of productivity. Financial incentives that pay for performance have been shown to be effective at raising productivity in the public administration, such in the case of tax-collection in Pakistan, where revenues increased by 50 per cent as a result of monetary incentives for collectors (Khan et al, 2016).


5 CONCLUSION

Malaysia has been under the World Bank’s consultancy, implementation and supervision of economic development projects since 1960s, and by participating in the World Bank’s Worldwide Bureaucracy Indicators (WWBI), a global dataset on public sector employment and wages covering 132 countries, Malaysia may hope to better benchmark various aspects of her public sector against comparator economies.

Further, by combining the WWBI with, for example, data from the Worldwide Governance Indicators and the World Values Surveys, a richer picture of the correlates between public sector investments, the quality of governance, and citizens’ attitudes towards government could possibly be drawn.

Whether the country can really aim high to achieve high growth (World Bank, 2021) or merely catching up (World Bank, 2022) is the daunting task of a capital-ethos, entrapped financialisation capitalism economy swirling in an ethnocapital-centric clientele-rentier relationship while wallowing within a  kleptocratic capitalism domain seeking, craving and needing to gain unsavoury monetary entitlement rather than to improve the administration of its civil service deliverance.

The constant and often, continuous, offering cash increments to civil servants without due, appropriate and quality public goods and services deliverance is more than grave and hurtful injustice to every rakyat2.

EPILOGUE

“The civil service has become heavily politicized and it is difficult for senior civil servants to maintain professional independence in carrying out their responsibilities.”

The Civil Service, fossilised through centuries of feudal enculturisation and embedded with colonial mentality through an ethnocratic-dominated administration requires a superstructure that calls for an pulsating political initiative, a positive political positioning and a political power threshold to rejuneverate and rebuild.

The country, more than ever – and not never – really has to not only enhance the capacity in administration of state but also to reconsider re-imaging society tempered and templated on an ideal politico-economy.

Bibliographies

Basri, M.C., et al, Tax Administration vs Tax Rates: Evidence from Corporate Taxation in Indonesia. MIT.

Duflo, Esther et al, (2012), Incentives Work: Getting Teachers to come to School, American Economic Review, 102 (4), 1241-78.

Khan, M.Y. and Rezaeek, A. (2020), Data and Policy Decisions: Experimental Evidence from Pakistan.

Khan, M.Y. (2020), Organisational mission, financial rewards and performance of bureaucrats. University of California, Berkeley.

Rasul, Imran and Rogger, Daniel (2016). Management of Bureaucrats and Public Service Delivery: Evidence from the Nigerian Civil Service.

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