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.

– □□□ –

Related Readings

Reforming Malaysia’s Government Finances

Ramesh Chander, Murray Hunter, and Lim Teck Ghee

Towards a post-2020 Political Economy

UNEQUAL EXCHANGE UNDER NEO-IMPERIALISM

Imperialism never ended – it just changed form

1] INTRODUCTION

A paper in the New Political Economy (NPE 2021 henceforth referred) published online: 30 Mar 2021 Jason Hickel, Dylan Sullivan and Huzaifa Zoomkawala contended that wealth drain from the Global South remains a significant feature of the world economy in the post-colonial era; rich countries continue to rely on imperial forms of appropriation to sustain their high levels of income and consumption.

The researcher-authors discover that the Global North appropriated from the Global South commodities worth US$2.2 trillion in Northern prices that are enough to end extreme poverty 15 times over. Over the 1960–2018 period studied, the value drain from the Global South totalled US$62 trillion (constant 2011 dollars), or UD$152 trillion when accounting for the Global South countries’ lost growth. Indeed, it is found that the appropriation through unequal exchange represents up to 7% of Global North’s GDP and 9% of Global South GDP.

Net appropriation occurs because prices are extremely low in the Global South averaging one-fifth of Global North workers’ wages, see TNC Labour Exploitation MANUSCRIPT. Samir Amin and Arghiri Emmanuel had described this as a “hidden transfer of value” from the Global South to sustain high levels of income and consumption in the Global North.

Indeed, according to the NPE 2021 authors, the Global South losses even outstrip foreign aids by a huge margin, for instance, every dollar of aid to the developing countries would they lose US$14 through unequal exchange rates, transfer pricing, price trading, illicit financial outflows from corruption, tax evasion, profit repatriation or money laundering through smuggling.

2] NEO-IMPERIALISM WITH MONOPOLY CAPITAL STRONGHOLDS

Even before the Federation of Malaya gained independence, the International Bank for Reconstruction and Development (IBRD) Mission of 1954, had already schemed definitive proposals to propel the country’s industrialization program towards a neo-imperialism orbit. Its platform’s The Report of the Industrial Development Working Party, Kuala Lumpur, 1957 bound succeeding ruling regimes to monopoly-capitalism till today.

That enactment in August 1958 gave tax incentives to pioneer industries and permitted assurances to remit profits and capital, and against nationalization to foreign investors. The Foreign Investments Guarantee Agreement provides protection against the risk of expropriation without adequate compensation and non-convertibility of profits; this Agreement was signed with USA, Germany, Canada and The Netherlands. Further, double-tax agreements have been signed with the United Kingdom, Japan, Singapore, Sweden, Norway and Denmark.

IBRD was the original World Bank institution where it works closely with the rest of the World Bank Group to help ostensibly developing countries reduce poverty, promote economic growth, and build prosperity. However, there are often ‘conditionalities’ imposed on borrower countries where loans are based on what is termed the ‘Washington Consensus’, focusing on a neo-liberalization thrust 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 as 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, industrial-capitalists and later ruling regimes’ ethnocapital as well as monopoly-capitalists globally.

As expressed in NPE 2021, during the 1980s and 1990s, IMF structural adjustment programmes cut public sector wages and employment, while rolling back labour rights and other protective regulations that cheapened labour and resources immensely. Presently, all poor countries are structurally dependent on foreign investment but have to compete with one another “to offer cheap labour and resources in order to please the barons of international finance”.

There is no lack of investments in the manufacturing sector in the case of Malaysia. In 1957, 60% of share capital was then owned by transnational corporations (TNCs). There was a growth of 12% per annum by value added in manufacturing, but direct employment in the manufacturing sector grew less than 9% annually. The predominantly inward-oriented industrialization strategy catered the ruling class consumption and bourgeois middle income consumers. The protection and incentive schemes in the pioneer industry entrenched industrial enclaves and extended monopoly-capitalists exploitation process thereon and henceforth.

3] MONOPOLY-CAPITALISM EXPLOITATION

Monopoly-capitalist exploitation in the manufacturing sector is empirically demonstrated in the following findings. British firms, for example, which constituted 1% of the manufacturing establishment but 19% of the total sale, hired only 8% of the employees in the manufacturing sector; American firms constituted 0.2% of the manufacturing establishment with 16 firms, took 5% of the sale, but only 1.1% of workers hired, (Federation of Malaysia, Census of Manufacturing Industries, West Malaysia 1958, p.38).

An analysis of these limited companies’ reinvestment rates found that Japanese firms had a low 10%, American firms were. 11%, British 14% and Singapore 22%, (Charles Hirschman, Ownership and Control in the Manufacturing Sector in West Malaysia, UMBC Economic Review, United Malayan Banking Corporation, Kuala Lumpur, Vol.7 No.1, 1971, p.26).

Hence, TNCs invested sparingly, employed lowly, tech transfer minimally, but produced and profited highly.

Indeed, in 1980, for example, the average profit rates on US direct investment abroad in developing countries were about 30% where the profit equals income plus fees and royalties as percentage of total investment, (as cited from Robin Broad, identifiable as the U.S. Department of Commerce computer print-outs, Unequal Alliance: The World Bank, the International Monetary Fund and the Philippines, University of California Press, 1988).

The outflow of profits and capital gushes unceasingly since the implementation of tax exemptions and other favorable pioneer status inducements. For example, the tax reliefs on profit, amounting to 40%, and dividends paid out of profits, under the 1958 Pioneer Industries Ordinance come at a time when the country’s development and social expenditure needs are growing, but the protection and incentive systems have eroded national revenues. The introduction of the Investment Incentives (Amendment) Act in 1971 accelerated the rate of capital exploitation and capital repatriation processes. By this legislation, manufacturers of electronics and electrical companies can claim 10 years of tax relief; TNCs do not request the maximum period as this entails employing more personnel as a condition under this claim.

Further, companies granted investment tax credits are able to deduct from their taxable incomes a sum not less than 25% of capital expenditure incurred on factory, building or machinery. The contradictions in Malaysia’s industrialization program are clear: on one hand, there is a policy to increase employment through labor-intensive industries, but on the other hand, there is a concurrent incentive scheme which favors a capital-intensive strategy.

There is even a capital allowance scheme for building and plant expenditures incurred, and when incorporated with the accelerated depreciation allowance incentive, companies will virtually have 90% of eligible capital expenditure completely written off within 5 years.

4] THE UNEQUAL EXCHANGE INTERMEDIARIES

The perpetuation of Neo-Imperialism would not, and cannot come about if the pervasive middlemen and the networks of rent-seeking cohorts in the plantation, mining, commerce sectors were dismantled.

However, the ownership and control have not changed substantially, and though local capitalists and the intermediaries are not necessarily those of Chinese middlemen or Indian compradors nowadays, but kleptocrats that serve as the most obvious link in an exploitative economic system. Owing to the imposed ethnocentric nature of economic activities, any present economic discourse has often tended to deflect rakyat2 attention and hostility away from those more powerful and central actors that are looting the country’s tills, (see STORM 2013: Illicit Capital, Illegal Trade and Inequality – Kleptocracy in Malaysia).

The emergence, and roles, of ethnocapital have evolved since independence gained, and with the New Economic Policy (NEP) implemented has only reconstructed the political process of economic nationalism.

Historically, the country has been a place where many, and large, fortunes were amassed. Whereas the majority of businesses built during the prewar period were found in the tin and rubber industries that comprised illustrious family firms built by Low Yat, Loke Yew, Chong Yoke Choy, H.S. Lee, Tan Chay Yan and Lau Pak Khuan who colluded with colonial British plantation interests to build their empires, the 1980s “new money-capital” entities like YTL Corp’s Yeoh Tiong Lay, Berjaya’s Vincent Tan, Genting’s Lim Goh Tong, Sunway’s Jeffrey Cheah, Lion’s William Cheng and the Ananda Krishnan groups and business stables attempted the forging of more Sino-Indo-Malay corporations, that is, a co-opetition strategy whereby Chinese and Indian capitals can compete as well as co-operate with Malay interests. Those Kuoks, Tehs and Queks were the pioneers in the sugar and palm oil, property and banking sectors during the British Empire, whereas the YTLs’ and Berjayas’ and Annans’ were maintained and retained by transnational connections in the post-independence neo-colonialism period, and the GLCs (government-linked companies) and GLIC (government-linked investment corporations) formulated were sustained with, and by, various ethnocracy kleptocratic regimes ever since.

What Gomez and Saravanamuttu in The New Economic Policy in Malaysia Affirmative Action, Ethnic Inequalities and Social Justice, ISEAS 2013) had indicated is that economic situations have worsened after the New Economic Policy (NEP) was implemented. They faulted upon the preferences designed to encourage Bumiputera entrepreneurship were sadly disproportionately utilized by members of the targeted group in urban and the more prosperous rural areas. The present policies of protecting Malay special rights are often regarded as a mere pretence intended to prevent bold and modern economic activities in rural society, by suceeding ruling regimes, following the colonial practice of divide and rule.

Indeed, the issues are relating to the concentration of economic power (as driven by a stronghold of clientelism) and the ensuring political clientel relationship where ruling elites in the United Malay National Organisation (UMNO) had aligned with economic oligarchs in accepting rentier capitalism to sustain their hold on power. They adopt this clientelism as solicitations for votes at the grassroots level, allowing ruling elites the party patronage and political power to “effectively partisanizing them and ensuring ground-level officials with whom most voters interacted with ……are political party loyalists” (Weiss, 2020), resulting in the skewed distribution of profits by political stakeholders and the stark inequality of wealth permeating in the country (Khalid 2019).

There is every reason to say that patronage position is ever in the prescence of ruling elites and the political power that oozes dominating control therefrom. Indeed, ruling elites are the biggest “owners” of divisional-level of UMNO constituency places with the office-bearing posts that defined political positioning posts with the ensuing power distributing spoils that emit therefrom. The ownership of ruling regime’s divisional-level [place], by situating in a office-bearing [position], with the control of vested distributing [power] spoil elements is, thus, explicit.

Now with the advent of infrastructural platforms, the role of ethnocapital has changed from managing physical assets in a GLC to that as intermediaries to IT service providers. Not only the ecosystem responsibilities have enlarged, the asset management is huge, too.

JENDELA as part of the 12th Malaysia Plan (2021-2025) with RM$21 billion of which 40 per cent is derived from Malaysian Communications and Multimedia Commission (Universal Service Provision (USP) funds with the remaining 60 per cent to be funded by industry players; tender for infrastructure works at 1,661 sites involving an investment value of RM4.6 billion under JENDELA, closed on March 31, 2021, during a time of when capitalism is colliding into an Ecological-Epidemiological-Economic crisis.

In 2021, both the telecommunications industry and MCMC will be working together to track the migration from 3G to 4G, as Jendela aims to build a solid foundation through the optimisation of the 4G network and fiberising of premises in Malaysia , besides increasing mobile broadband speeds from 25Mbps to 35Mbps and enabling up to 7.5 million premises to access gigabit speeds with fixed broadband services.

5] CONCLUSION

i) With 1990s’ unrestricted movement of international finance capital, public sector enterprises or government-link companies (GLCs) increasingly are subjected under the bound of financialization capitalism. The metropolitan capital-as-finance, expressed by Patnaik, gets control over Third World resources and enterprises to see the rise to international finance capital in league with the local neocomprador class becoming crony capitalism through the force of accumulation as articulated by Samir Amin (2019) in The New Imperialist Structure, Monthly Review, July 01, 2019. Anchored upon a capital-market system, this leads to the emergence to, and the pervasion of, financialization capitalism in Malaysia, and the consequence of continuance of indebting the nation:

ii) According to Emmanuel’s premise is that , unequal exchange in the ‘strict sense’ characterises the trade rela­tion between the centre and periphery whereby ‘the inequality of wages as such, all other things being equal, is alone the cause of the inequality of exchange.’

As a corollary, Emmanuel had argued that “by transferring through non-equivalent exchange, a large part of its surplus to the rich coun­tries, the periphery deprives itself of the means of accumulation and growth.”  Thus, an impor­tant implication of Emmanuel’s theory is that a widening wage gap leads to a deterioration of the periphery’s terms of trade, and a subsequent reduction in its rate of economic growth, see Emmanuel’s formulation on his theory.

A glaring scenario is presented in the case of Malaysia tied to the financialization capitalism of, and closely connected to, monopoly-capital in the Global North with the dire aftermath repercussions from the Asia Financial Crisis 1997 and the Global Financial Crisis 2008 era (see Post-1997 Political Economy and Underdevelopment under Monopoly-capitalism, May 2021).

The Stagnated Economy, Sudhdave 2020

iii) Applied, there is a growing centralisation of political and eonomic power in the Office of the Prime Minister and the Minister of Finance with a confluence of influence of the state over the GLCs that have the concentration of capital and accumulation of capital as Gomez laid out in Minister of Finance Incorporated: Ownership and Control of Corporate Malaysia :

The web of the Prime Minister Office that is linked to the Prime Minister Economics Affair controlling government corporations, registered companies, trust and saving funds, cooperatives, state authorities, research and development departments The Political Economy of Malaysia

iv) And more importantly, by offering higher dividend returns, cooperating closely with those local corporate capital that have connections to Global North monopoly capitalists and through internationalising  their operations, they successfully link up electrical and electronic small manufacturing enterprises (SME) with products assembly, supplies and logistics competitiveness into the Global North supply chains where an exemplary entity can be seen in the pharmaceutical industry at times of a pandemic in Pharmaniaga.

v) TM, similarly, has the franchised monopoly as a GLC, owning the national digital telecommunications sector and controlling upstream and downstream the supply chain. With the unveiling of the Malaysia Digital Economy Blueprint (MyDigital) on 19th. February 2021, TM will be given relevant spectrum to own, execute and manage the 5G infrastructure.

Most investment analysts agree that Telekom Malaysia Bhd (TM) is a key beneficiary given its global network of over 20 submarine cable systems and over 560,000km of fibre network across Malaysia. “We raise our FY20-FY22 earnings forecasts for TM by 4% to 16% after factoring in higher data and internet revenue”, so said PublicInvest. (theedgemalaysia, 2021).

vi) The hardening of corporate capital monopoly tied to external resources sourcing from monopoly-capital only accentuate the depth of Neo-Imperialism penetration into the country, even in midst of a Covid19 pandemic ;

TM together with Microsoft, Google and Amazon as cloud service providers (CSPs) have been given conditional approval by the government to manage and build hyperscale data centres and cloud services for the public sector. TM, as the only home-based CSP, stands to benefit from the public sector’s recurring and growing revenue base, said Kenanga Research; the CSPs will total between RM12 billion and RM15 billion over the next five years. Strong fiber adoption from the national digital network (Jendela) project, net additions for Unifi and overall a higher growth for wholesale and data revenues are expected to lift Telekom Malaysia Bhd

vii) On those above-mentioned situational scenarios, what we have, according to Fitch Solutions, is that due to potential lack of transparency because the JENDELA rollout is through a Special Purpose Vehicle, there are three crony ICT companies being appointed as management service providers (MSP) whereby ethnocapital maintains and tightens ownership and control on new enterprise ventures.

viii) At a wider perspective is the spectre of unequal exchanges between Global North’s infrastructural platforms and Global South’s information technologies and information systems dependency :

In 2013 Apple had about 80,000 employees worldwide, Google around 40,000, and Facebook about 4,600; when Facebook purchased WhatsApp – for US$19 billion – it had only 55 employees. In fact, all these industrial-tech models eliminated jobs (by sacking people directly or by replacing or residening offshoring from their Global North businesses), and through the circuitry in monopoly-capital (Foster 2000; 2014; 2020) most of the jobs directly created predominatly in the Global South are call-centres, cloud-servers, systems integrators, routers distributors. [To read the job of a Google contractual worker, Fortune]

Within the two decades before the end of the millennium, digital monopolies have overtaken the older oil, automobile and financial monopolies in terms of capital capitalisation. Computers, networks, data centres and servers become the new technologies of capitalism roaming globally: the emergence of a digital system basing on gigantic infrastructural platforms becomes a reality for many bionic businesses, (BCG, Is Your Technology Ready for the New Digital Reality?, Boston Consultancy Group, May 08, 2020, and its The Bionic Company).

ix) Referring to NPE 2021, the periphery tends to transfer surplus through trade because its rate of surplus value is higher than the world average due to an international wage gap, which favours workers in the centre. Therefore, even if the organic composites of capital are equalised, unequal exchange results from the existence of a wage gap between the centre and the periphery, and within a nation the disparity in wealth distribution :

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, greater than that of Philippines, Thailand, Singapore, Vietnam and Indonesia.

It creates, therefore, a permanent tendency of lagged development in the Global South and a subsidized, superannuated Global North, (see ISR issue 107).

Labour, under an e-commerce environment, becomes digital-dehumanised workers where they are mere inputs in an Azeem Azhar’s AI interfacing intermediaries loop as conduits to big data storage and retrieval. A gig-worker daily experience and personal assets are exposed to financialisation or value extraction.

Thirdly, the USA tech-venture capital bloc’s reducing capital gains taxes in 1978 from 50% to 28% became known as the Silicon Valley model, now emulated all over the world (Marxist Sociology April 2021) with mitigated effect on “contingent workers”, (Fortune 2019). For Global North workers, today’s real average wage (that is, the wage after accounting for inflation) in USA has about the same purchasing power it did 40 years ago; and, what wage gains there have been have mostly flowed to the highest-paid tier of workers, (PewResearch 2018) :

Noam Chomsky once stated on the US economy structure “what you find is that $47 trillion were taken from the bottom 90%, the middle class and the working class, and put in the hands of the top 10%. But if you look closely, it’s a fraction of the top 10% which takes the greatest wealth. Since Reagan, they have doubled their ownership of society’s wealth from 10% to 20%.” 

The consequential manipulation of such raw data into timely, accurate, relevant and complete information – by infrastructural capitalism platforms that are so overwhelmingly powerful in exploiting not only surplus value of labour but in the regal accumulation of capital relentlessly, too, (Social Europe, Gig Workers Guinea Pigs of the New World of Work, February, 2021, and also see Foundation for European Progressive Studies, Governing Online Gatekeepers: Taking Power Seriously, 2021).

x) Through the ownership and control of information, this emergent class dominates not only labour but digital capital, too. Capital accumulation permeates the entire production chain but through soft elements in the ownership of patents, copyrights, brands and logistical systems – typically known as the Intellectual Property Rights -impoverishing the poors but enrich the bourgeoisie class by way of financialization capitalism that digitally routed neo-imperialism onto a refreshed monopoly-capital commodity supply chain pathway:

Instead of exerting downward pressure in the middle of the curve – the part on processes of production – intellectual monopoly has inadvertently points to an upward pressure at both ends of the smiley curve where the control over intangible assets (like R&D and design, and e-commerce marketing and post-sales interfaces) is most concentrated.

---

xi) One can say that this upward pressure on both left and right sides of the curve is a resultant outcome from dynamics arising from the growing role of intangible assets in the value chain processes, and also from tighter Intellectual Property Rights. This means that the market power of leading firms – the product/service initiators or front-runners – is often enhanced by intellectual monopoly endorsement which is fueled on one part by the dynamic advantages arising from global value chains network externalities, and on the other side, by the increasing returns on intangibles and legally-enforced proprietary control over standards, technologies and brands, (UNCTAD, The Digital Economy Report 2019: Value Creation and Capture: Implications for Developing Countries; Jomo 2020; Jomo 2021).

xii) There is a new battle on unequal exchange – not merely or only in the Production-exchange-Consumption model in physical goods – but in the soft digital arena presence in the infrastructural horizon: Digital generation-exchange-Usage which is still sheer expropriation and surely exploitative.

The implications for third world countries are that due to the monopoly-capital competition dynamics in the Global North, developing-country platforms that are trying to scale up typically face an uphill battle. The dominance of global digital platforms, their control of data, as well as their capacity to create and capture the ensuing value, tend to further accentuate concentration and consolidation rather than reduce inequalities between and within countries.

Secondly, in the global “data value chain”, many countries are already entrenched in subordinate positions, with value and data being concentrated in the few global platforms and other leading transnational corporations.

Thirdly, the surfing serfs of the world are increasing digitised into slavery to the triad of capitalism, monopoly-capitalism and financialization capitalism where labour is outsmarted by machines.

Capitalism never fade – it just change formations

---

More MALAYSIAN MANUSCRIPTS

---