collated and compiled by the Collective on Geoeconomics
12/04/24
INTRODUCTION
KS Jomo and Ngongo have expressed that since the 2008 global financial crisis, developing nations have to borrow massively from private finance – at exorbitant interest rates – to scale funding up ‘from billions to trillions’. Indeed, servicing external debt now blocks progress whereby governments have cut back spending in line with conditions or advice from powerful foreign economic agencies as such. Onset with the global debt crisis in 1979 the transition and developing Global South economies had paid cumulative US$7.673 trillion in external debt service, seePaulo Nakatani and Rémy Herrera.
In fact, the external debts of developing and transition countries reached 29% of their GDP in 2019. The short-term debts rose to more than one-quarter of the total external debts alone.
The Global South debt even then during the same period has increased from US$618 billion in 1980 to US$3.150 trillion in 2006, according to figures published by the International Monetary Fund (IMF). The external debt of this group of countries, comprising 145 member states, will continue to grow throughout 2007, according to the IMF, to more than US$3.350 trillion. The debt of the Asian developing countries alone could rise to US$955 billion, even though they have already repaid, in interest and capital, far more than the original amount due in 1980!
Malaysia 2019 external debt was RM$231225.9 million, (Asia Development Bank, External Debt Outstanding in Asia and the Pacific, Asian Development Outlook, April 2020).
According to a report to the Asian Development Bank, in September 2020, by Donghyun Park, Arief Ramayandi, Shu Tian stating inter alia that borrowing heavily for fiscal stimulus packages to support growth and provide relief for vulnerable groups whilst at the same time, private companies and households may be forced to borrow more to survive the economic impact of COVID-19…..In addition, the economic downturn challenges their capacity to service their existing debts. Therefore, despite widespread concerns about the current escalation of public debt and its sustainability, we should not lose sight of the potential risk from possible surges of private debt…..
Coupled with a weakening economy, already, as late as July 2023, a IMF Report has projected that under its baseline forecast, growth will slow from last year’s 3.5 percent to 3 percent this year and next – a 0.2 percentage points. Our MIDF Research data have maintained its forecast that Malaysia’s GDP growth would moderate at 4.2% in 2023 (2022: 8.7%), weighed down by uninspiring external trade performance as real export of goods is predicted to contract by 2.8% (2022: +11.1), reflecting weakness in regional and global demand.
Furthermore, the national household debt-to-Gross Domestic Product (GDP) ratio had already surged to a new peak of 93.3% as at December 2020 from its previous record high of 87.5% in June 2020, according to Bank Negara Malaysia (BNM).
Malaysia National Government Debt reached 255.4 USD bn in Dec 2023, compared with 246.4 USD bn in the previous quarter. Malaysia Government debt accounted for 64.3 % of the country’s Nominal GDP in Dec 2023, compared with the ratio of 63.8 % in the previous quarter; seecsloh, Destined to Debts.
We shall define the Global debt as borrowing by governments, businesses and people. Presently, it is at dangerously high levels. In 2021, global debt reached a record US$303 trillion, a further jump from what was record global debt in 2020 of US$226 trillion, as reported by the International Monetary Fund (IMF) in its Global Debt Database,21 Dec 2023.
The IMF must do more to support low-income countries and fragile states, Managing Director Kristalina Georgievasaid on Tuesday at the Center for Global Development (CGD).
Speaking with Masood Ahmed, CGD President, Georgieva called for the Fund to be more representative of the global economy, with a better balance between advanced economies and the voices of emerging and developing countries. She also expressed the need to help countries build resilience to a more shock-prone world.
Georgieva said she sees two equally important tasks for the Fund: “To ensure that we have the financial capacity to operate, and support vulnerable middle-income countries and low-income countries……And to bring our membership together….Despite all the difficulties in cooperation, we will work towards consensus on those issues on which the future of our children and grandchildren depend,” Georgieva said. She also explained the IMF’s role in its work on climate.
During a subsequent conversation with World Bank Group President Ajay Banga at an event on support for low-income countries, Georgieva shared more of the Fund’s thinking. For low-income countries to reduce vulnerabilities and achieve a sustainable and meaningful rise in income levels quickly, it will take the countries themselves to do more to build the strength of their economies, and the international community to be a reliable partner, she said.
“We see that those [countries] that are doing better are countries with strong institutions, rule of law, transparency, and less corruption, and building those strengths is something no one but the countries can take on.”
Domestic laws need updating to ensure that public obligations are transparent
April 2, 2024
If efforts to address record global public debt are to leave no stone unturned, then weak disclosure laws warrant deep scrutiny. Hidden debt is borrowing for which a government is liable, but which is not disclosed to its citizens or to other creditors. And while this debt—by its nature—is often kept off the official government balance-sheet, it is very real, reaching $1 trillion globally by some estimates.
While these undisclosed obligations are not large when compared to global public debt topping $91 trillion, they pose a growing threat to low-income countries, already highly in debt with annual refinancing needs that have tripled in recent years. The problem is even more pressing amid higher interest rates and weaker economic growth. Accountability, too, is imperiled without accurate information about the extent of borrowing, which heightens the risk of corruption.
Building on a July 2023 paper, our new research shows that fewer than half the countries surveyed have laws that require debt management and fiscal reports, while less than a quarter require disclosure of loan-level information—key legal features for facilitating transparency. We also identify four noteworthy vulnerabilities in domestic laws that enable debt to be hidden: a narrow definition of public debt, inadequate legal requirements for disclosure, confidentiality clauses in public debt contracts, and ineffective oversight.
Definition
In many countries, a narrow definition of public debt, in one or in multiple laws, permits some forms of sovereign debt to escape oversight. We recommend that the definition of public debt be broad and comprehensive, meaning that it should capture arrears, derivatives and swaps, suppliers’ credit, and assumptions of guarantees as well as loans and securities. The definition should also cover extra budgetary funds, public trust funds (pension funds, for example), and special purpose vehicles.
A good example is found in Ecuador, which pursued legal reform in 2020 to ensure that short-term financing instruments—such as securities or treasury paper with terms of less than one year—were included in debt calculations and statistics. Other good examples include the legal definitions used in Ghana, Jamaica, Rwanda, Thailand and Vietnam, all of which encompass multiple types of debt instruments.
Disclosure
Second, across the globe, legal requirements for debt disclosure are inadequate. A strong legal basis is crucial to signal that there is a clear requirement to report debt data in a manner that is both timely and relevant for policy analysis, transparency and accountability. Strong reporting laws are found in in Benin, Kenya and Rwanda, which define both public debt reporting requirements and the timeframes for these reports.
Confidentiality
Confidentiality in public debt contracts directly hinders transparency. Across the globe, few laws regulate (and limit) the confidentiality of public debt, which hands policymakers wide discretion to label such contracts confidential for national security or other reasons. This is exacerbated by the fact that current debt-related international standards and guidelines provide limited guidance on how to tackle confidentiality issues.
We recommend that the law tightly define exceptions to disclosure and the scope of confidentiality agreements. Legislative oversight and other safeguard mechanisms such as administrative or judicial remedies should also be spelled out in the applicable legal provisions. Laws in Japan, Moldova and Poland are among the few that authorize legislative or parliamentary oversight of confidential information.
Oversight
The disclosure of public debt may also be inhibited where there is ineffective oversight governance by legislatures and supreme audit institutions (national government audit institutions), which are all important guarantors of accountability. Legislative bodies must be able to monitor and scrutinize public debt on behalf of the people, and they need to have staff able to read and grasp highly technical reports.
Several legislatures have a committee system—such as committees on the budget and public accounts—which allows for specialization among legislators. An example is in the United States, where the Treasury Secretary is required by law to send the annual public debt report not to Congress as a whole, but to two specific committees—House Ways and Means and Senate Finance. We also recommend that laws provide supreme audit institutions with the authority and the necessary powers to monitor and audit government debt and debt operations.
IMF role
Debt transparency not only benefits countries directly, but it is also essential for the work of the IMF. Hidden and otherwise opaque forms of debt make it more difficult for the Fund to fulfill its core mandate in a number of ways. For example, collateralized loans, novel and complex forms of financing, and confidentiality agreements make it difficult for the IMF to accurately assess a country’s debt and help bring its economy back on track.
Thus, the Fund works to bring the benefits of debt transparency to countries directly through technical assistance and also addresses the issue in our program engagements.
Well-designed laws make it harder to hide debt. But there are not enough of these laws on the books, despite their demonstrated benefits. Given the critical importance of getting transparency right, countries and their international partners must push for reforms to improve domestic legal frameworks, which in turn benefits both borrowers, legitimate creditors, and the system more broadly. Turning stones has never been more important.
— Kika Alex-Okoh contributed to this blog.
ADDENDUM
By way of confronting China with the peak paradigm by dispelling “Peak China” myths and affirming China’s development trajectory (john ross; Habib al Badawi; the diplomat; CfR; The East is Rising, the West is Declining {东升西降}) is much a discourse that China only wants to export its labour, that China only wants to grab the world’s resources, etc., and is engaged in debt diplomacy suppressing emerging economies in their development endeavours. The Johns Hopkins University’s China-Africa Research Initiative website has exceedingly valuable statistics and reports and blogs about this matter; this site also has a discussion on the China Trap Diplomacy whereas PRC firms are being told to reduce their financial exposures in overseas jurisdictions that could move to seize assets; and there is a good roadmap since the seizures of Russian assets after the invasion of Ukraine; readCounter Sanction Strategies that China Can Learn from Russia,Ding Yifan; Countering Western Sanctions, Yi Yan.
Looking at the chart below:
This chart actually plots Chinese credit, so it’s the debt of the rest of the world, the developing world, to China. And the chart on the left simply indicates the way in which debt owed to China has, of course, increased over the course of time as a result of Chinese development assistance and China’s lending, especially to parts of the Global South; readRISE OF CHINA AND DEMISE OF CAPITALIST WORLD ECONOMY.
One of the very striking things about China is that a large share of its lending is, in fact, to very low income countries. It lends more to the least developed countries in the world than do the multilateral institutions and do the OECD group.
If you see the least developed countries, their total debt to the rest of the world is 43% of their gross national income, which is, nearly one half, a very substantial share. Of that debt, the share owed to China is only 5.5%. And Chinese debt amounts to 12.8% of the total.
China’s share of GNI is 4.3%, and its share of the total debt of sub-Saharan Africa is 10%. So these claims about a debt trap are, in a sense, simply do not stand up empirically.
Malaysia is at a juncture in its politico-economic path crashing into fractious politics headlong on an inequity route with an expanding B40 lower-income class, (mef.org 2023). The socio-economic situations are becoming precarious. This is because of a stagflation risk arising amid sharp slowdown in growth that is accompanied by an accelerated inflation runaway globally, (World Bank, Global Economic Prospects, June 7, 2022) as confirmed by the Bank of International Settlements in its Annual Economic Report, 26 June 2022, and amid subdued external demand could only edge up to 4.3% GDP in 2024 (World BankMalaysia Economic Monitor 2023), though Standard Chartered gave a favourable 4.8% of GDP; while the Madani Malaysia model is trekking slowly along an uneven economic development track that is strewn with global geoeconomic uncertainties and internal socio-economic instability.
Could and would the enlargement, and deepening, of the infrastructural platforms accompanying an artificial intelligence regime therein salvage the state of a nation or the adoption of such advance technology savages the country with further neo-imperial penetrative wounds while accompanying digitalised colonisation process?
I] INTRODUCTION
Standing at a crossroads of techno-capitalism and neo-imperialism, artificial intelligence (AI), with its potential promise though has profound existential problems to the Global South because advances in AI originated in wealthy nations of the Global North — developed in those countries for local users, using local data. Over the past several years, Columbia’sDanielBjörkegren and Berkeley’s JoshuaBlumenstock for Finance & Development have conducted research with partners in low-income nations, working on AI applications for these countries, users, and data. However, AI systems require investment in knowledge infrastructure, especially in emerging and developing economies, where data gaps persist and the poor are often, if not, always digitally underrepresented. Besides, developing nations typically ill-afford such expensive large-scale deep neural networks infrastructure using expensive AI-driven application software.
Afterall, Artificial Intelligence (AI) leverages computers and digital machines to mimic the problem-solving and decision-making capabilities of the human mind.
Frequently, the techno-optimism in the advanced economies (GoldmanSach 2023; and, according to a Bloomberg’s PwC Report, AI would boost the global GDP to US$15.7 trillion by 2030) is at odd with Global South economic development outcomes, (Daron Acemoglu Simon, IMF); where AI technology is in likelihood to destroying jobs and displacing workers, (Andrew Berg Chris, IMF); or where the building block for AI governance is weak (Ian Bremmer, Mustafa, IMF) on system design, project implementation and subsequent operational processes. Indeed, Artificial Intelligence could well widen the gap between rich and poor nations, (Alonso, Kothari and Rehman, IMF Blog Dec 2, 2020; IMF 2018).
Then, on this understanding, to duly acknowledge that in emerging markets such as India, where agriculture plays a dominant role, less than 30 percent of employment is exposed to AI. Brazil and South Africa are closer to 40 percent. In these countries, the immediate risk from AI may be reduced, but on the other hand, there may also be fewer opportunities for AI-driven productivity boosts, (Gopinath, Harnessing AI for global good).
Secondly, Silicon Valley corporations are taking over the digital economy in the Global South with little notice, or for those encouraged by the World Bank – but short-circuiting the rakyat2 – as in Malaysia,(WB 2021; MEM 2023), the domestic infrastructural platform ecosystems are already consolidated by the Global North monopoly-capital Big Tech, (STORM 2023). In case country South Africa, Google and Facebook dominate the online advertising industry, and are considered an existential threat to local media. Uber has captured so much of the traditional taxi industry that drivers have been petrol bombed in the “South African taxi wars”. Similar battles have broken out in Kenya, (al jazeera, 2019).
Netflix is not only pulling subscribers away from local television services, but are buying up content in Africa. While in India, Facebook was forced to cancel its “Free Basics” programme that gave the social media giant control over the Internet experience on mobile phones, she was able to retain its influence in countries like Kenya and Ghana.
This is known as digital colonialism where once former Colonial powers deployed their infrastructural domination in ports, waterways, and railroads across their vast empires, only that at present day neo-colonialism is continued through digital routers and data servers.
The digital infrastructural platforms are not unlike colonial ‘forward movement’ activities where lands are waiting to be discovered and conquered. Whoever gets there first, and holds fast and tight, shall get their information server-riches. The infrastructural platform kings (colonial-feudal lords) positions themselves above users (the colonised), and their data surfing activities (serfs’ farm cultivation), thereby giving them overwhelming privileged access (lordship) to record and retrieve (dictate and dominate) endusers (the serfs) as and when demanded (as surplus value expropriation) under an information-commodity chained monopoly-capital environment (via routers and cloud servers) .
Thirdly, tech capital flows unencumbered trans-borders where new ecosystem of digital platforms has emerged over the past decade that is transforming the very structures of capitalism. This new business model of large monopolistic digital platforms are capable of extracting immense amounts of data overwhelming legacy enterprises and suppressing labour empowerment, (seePaul Langley and Andrew Leyshon, 2020). This is “netarchical capitalism” , where infrastructure is “in the hands of centralized privately owned platforms”, (Nick Srnicek, Platform Capitalism, 2017).
Information and infrastructural platforms have empowered a new kind of ruling class. Through the ownership and control of information, this emergent class dominates not only labour but capital. It is not just tech companies like Amazon and Google; even Walmart and Nike can now dominate the entire production chain through the ownership of brands, patents, copyrights, and logistical systems – all “soft” elements than physical end-products, all accumulated through financialization capitalism through a neo-imperialism monopoly-capital pathway.
Digital technology has already indeed transformed the world economy; the decade leading up to 2019, the largest 100 firms in the world had increased their total market capitalisation by US$12.7 trillion. A third of that increase (US$4.2 trillion) can be accounted for by just seven firms: Facebook, Amazon, Apple, Alphabet, Microsoft (the famous quintet ‘FAAAM’), Tencent and Alibaba. The aggressive rally of tech stocks during the COVID-19 pandemic had given due recognition that an entirely new model of value creation was enabled, and primarily all enhanced, by digital technology. Tech companies are the new empires of today: Alphabet revenue surpassed Hungary’s GDP, Facebook employs over 15000 content moderators around the world, and Microsoft has built data centers in nearly every corner of our planet, with Google global dominating the infrastructural platform corporate businesses.
Hidden from view, but the most vital part of this Techno-capitalism identity is the convergence of fibre-optics under the strategic blue waterways and sea corridors around the world that connected the various routers and artificial intelligence neural-networked database in a singularity ecosystem:
Since raw data, processed information and uninterrupted communications are of prime importance in a globalised geoeconomic environment, the installation, repairs and maintenance of the underwater cables in the country are with these infrastructural platform players of tech giants such as Google, Amazon and Microsoft, and the national internet exchange body, Malaysian Internet Exchange. However, the conflicting battle between national sovereignty and Global North financialised monopoly capitalism only accentuate the brute reality of intrusive Techno-capitalism and its digitalised colonisation process, (STORM 2023, marine-cabotage-under-netarchical-capitalism; whereas, the neo-imperialism aspects on 5-Eyes, Unmanned Underwater Vehicles, USVs, and the geopolitics involving AUKUS and QUAD are covered in firesstorms, August 2022).
II] TECHNO-CAPITALISM
With the emergence of new capital, the capital-endowed new ruling class extracts the content capacity of information to route around worker and social movements to barricade labour participation and involvement. The emerging ruling class is the digital feudal lords overseeing a common of digital infrastructure where bands of peasantry-labour are the digital gig-slaves to be exploited. In this digitalized business model, returns do not diminish as businesses scale up but increase exponentially. Geared towards the exploitation of digital-dehumanised workers (Yanis Varoufakis) whence they are mere interfacing intermediary conduits to big data storage and retrieval by infrastructural platforms powered by artificial intelligence nowadays that are so overwhelmingly powerful in exploiting surplus value of labour relentlessly, and with brutal efficiency, it is the accumulation of capital, through and thoroughly (Ursula Huws, Labor in the Global Digital Economy: The Cybertariat Comes of Age, 2014; read a case country of digital knights in a kingdom of infrastrutural thrones, in STORM 2020; Big Tech and Large Gig-Labour: STORM, June 2022 and Digital Labour: STORM, December 2020 ; and a related essay on Techno-feudalism, in STORM, August 2022).
It is also becoming but unbelieving for foreign investors – specifically Global North monopoly-capital corporates – not wanting to partner local expertise to provide support and services from their financialised capital. These Global North entities insist on retaining their monopoly investments, especially on the infrastructural platforms varied ecosystems.
As an instance, the country needs local expertise to ensure our national undersea cables are well maintained and not to be wholesomely dependent on Global North monopoly-capital corporations on an unequal economic and inaccessible technological exchanges. That the international infrastructural platforms had once threatened to withdraw in cooperating with the national digital economic aspiration is uncalled for.
At a time of an epidemiological-economic-ecological polycrisis, many national banks accelerated the monetary flow – and the resulting wave of liquidity – leading to substantial increases in corporate wealth in many developed and advanced economies, whereas the emerging and low income economies face external debt distress compounding poverty of the global poors, (World Bank 2022; STORM, 2022, Wealthy Rich, Poverty Poors). As a result of falling income levels, widespread employment losses and widening fiscal deficits, (UNCTAD 2020) – a rakyat-oriented governance should not allow appearance of vulture-capitalism in the guise of infrastructural platforms be roaming the waves of high blue waterways as predatory pirates, (STORM, January 2023) when there is a sea of opportunities for the country in laying submarine cables, too:
And even as the Covid-19 pandemic coursed through the world’s population, Apple, Microsoft, Alphabet, and Meta Platforms – were able to rake in US$255.7 billion in profits in 2022, or 16.4% of the Fortune 500’s total earnings for the year, (Fortune, June 2023). Their capital accumulation revealed grotesque class and racial inequalities and the gross lack of public investment and preparation, (monthlyreview).
To compound developmental efforts, transnational corporations (TNCs) exploit legal loopholes in low-income countries (LICs) to avoid or minimize tax liabilities by applying a practice known as ‘base erosion and profit shifting’ (BEPS). Under such circumstances, tax havens collectively cost governments US$500–600B yearly in lost revenue. Low-income countries will lose some US$200B – more than even the foreign aids of US$150B that they received annually, (Jomo, June 2022). Indeed, TNCs-supported agents, and lobbies, have blocked the International Tax Cooperation initiative, (Anis Chowdhury and Jomo Sundaram, June 2021) to ensure tax equity and revenue intake equality, (see also STORM 2023, International Corporate Taxes – issues of misdeeds).
And whatever financial assistance as rendered, the World Bank category of aid only encourages governments to enable illicit financial outflows to offshore tax havens – where such tax havens could cost countries US$4.7 trillion over the next decade, (icij 2024) – reducing capital controls, thus draining further precious foreign exchange and government resources, (KS Jomo, 2024).
III] DIGITALISED LABOUR
Nested in the platform capitalism model is the software component and the associated IT infrastructural platforms’ solutions. Unlike in the manufacturing sector where labour is kept within borders while capital moves freely, in Big Tech there is this process ability to intrude into a target country to install infrastructural platforms as well as troll the planet for cheap labour in any part of mother Earth at any time.
The resultant, and a transformed economy, is the gig economy, also widely defined as “platform economy”, “on-demand economy” or “sharing economy”, synchronises to the demand and supply of short-term or task-based work activities, and as a part of the national economy where freelancing workers use digital platforms to participate in the national economy, including their connections with the traditional yet formal businesses. According to Emir Research, about four million people in the Malaysian workforce which is about 26% of the labour force work in the gig economy; this is almost double the global average.
This business model is what technology guruAzeem Azhar names as the ‘AI lock in loop’ where, as the tech companies deploy products and services, they also collect data about their consumers’ use of those products and services. Through machine-learning processes performed on those collated data, these business entities envisage in presenting opportunities towards the development of better products and services. It is by integration of multiple data-rich digital assets into a single platform that gives such tech companies access to the entire vertical product chains (examples like Google or Grab siphoning off personal biodata and geographical locations) and the supply-chain capacity to expand horizontally into new products and services with relative ease and effectiveness. For examples: Google, Facebook, WeChat or Grab becoming cloud-servers, WhatsApp as a communications medium and Instagram an media aggregator, (Social Europe, Gig Workers Guinea Pigs of the New World of Work, February, 2021 where ‘bogus’ self-employment workers are left outside of the regulatory framework; Foundation for European Progressive Studies, Governing Online Gatekeepers: Taking Power Seriously, 2021; see also ILO 2021 report on the states of precarious digital labour.
In case country Malaysia, the adoption of digitalisation only deepen the stronghold of the monopoly-capitalised infrastructural platforms that support artificial intelligence domain, in the digital frontier and defranchised digitilased zero-hour gig-labour, (STORM 2023). This informal employment sector not only occupies a sizeable segment of the country’s workforce but inevitably it is without adequate social security safety provisions in place, (read csloh, 2022: Workers; Emir Research: Brain Drain; bernama: gig-economy and Khazanah Research Institute 2020, Shrinking “Salariat” and Growing “Precariat”?):
For AI to bind adhesively within a national economic development initiative, not only must the monopoly-capital-compradore-capital eIements be done away, but the labour exploitation factor be eliminated, too. Labour superexploitation conceptually captures the real condition of the working class in Africa, Asia and south America. It involves three elements: low wages, long hours, and intense work leading to due strenuous exhaustion. Above all, it is characterised by “the greater exploitation of the worker’s physical strength, as opposed to the exploitation resulting from increasing his productivity, and tends normally to be expressed in the fact that labor power is remunerated below its real value.” Ruy Mauro Marini.
An AI class analysis can be by way of applying Nicos Poulantzas concept of class [places] as existing at each of levels of society: economic, political, and technological. The class [positions] of the capitalist fundamental class processes are productive endusers (performers of data entry) and productive capitalists (extractors of processed data in the form of information).
The class relationship where dominating [power] ensues would be identified, therefore, through the stronghold of infrastructural platform [place] which has allied with financialised capital providers [positions] in the provision, control and ownership of software, hardware and process [power].
Capitalists appropriate surplusvalue from the consumption of enduser’s labour activities during the generation of data into processed information. The surplus (monetary and or metadata of say geographical locations in an e-hailing process) is distributed as extracted among beneficiaries of subsumed class positions like the state-enabler, IT vendors, financiers and compradore monopolies.
In essence, historical politico-economic development of a country comes from social practice, the struggle for production, the class struggle, and scientific work.
For the SCRIPT in Madani Malaysia to be successful, in term of implementation and sustainability of an AI-driven progressive politico-economic developmental praxis, working-class unity has to be consolidated. It can only be further solidified if the tenet of divisive divisions by capitalism is better understood both in theory and in practice. Hence, we argue for a comprehensive yet bold project that is based on TAPAO that goes beyond its ethos as a renewal of an socialist ideal with Malaysian characteristics in order to take full account of the struggle of the labour movement.
EPILOGUE
What are the remedies to limit infrastructural platform capitalism dominance, the AI perversion and the digitalised colonisation process?
A global tax on capital or the implementation of the Wealth Tax at the national level, is one way to allow for the creation of a “social state” meeting social needs, (Piketty, Capital in the Twenty-First Century).
Taggling digital labour by putting the most essential needs of people and the environment before profits where provision “jobs…for the unemployed, food for the hungry, houses for homeless, adequate health care and income security and a decent environment for all of us” whereby the highest priority is an implementation of these collective human goals to which all special interests would then be subordinated. (Magdoff and Sweezy, Stagnation and the Financial Explosion, 88–90).
The cacophony on orchestrating the Madani Economic Narrative ( MEN) is overwhelming loud, with the Malaysia Institute of Economic Research (MIER) not likely to hold the baton too soon.
Whether the Madani precepts alone can serve as the pillars of a grand nation-building project when a rumah in a kampung built on a capital-muddied stilted foundation likely to collapse at any time under a neoliberalism policy regime, is due for a conversation.
This is appropriate time because even an neoliberal institution – which was in the country prior to her independence as the International Bank for Reconstruction and Development (IBRD precursor to the World Bank) – has once again expressed the multifaceted problems facing the economic state of a nation:
These uncomfortable situational conditions are further decimated by the MIDF Research data which maintained its forecast that Malaysia’s GDP growth will moderate at 4.2% in 2023 (2022: 8.7%), weighed down by uninspiring external trade performance as real export of goods is predicted to contract by 2.8% (2022: +11.1), reflecting weakness in regional and global demand.
The 2nd August 2023 economic brief indicated that Malaysia’s S&P Global Manufacturing PMI recorded at 47.8 in July 2023 (June 2023: 47.7), marking 11 straight months of contraction which was mainly attributable to a significant dip in new orders, as demand has consecutively paced down for the last 11 months, (theedgemalaysia 2/8/23
The Madani Challenges facing this state of nation were familiar issues covering +65 years in the development of underdevelopment of a nation where poverty, inequality, and marginalisation are predominant. As late as 2015, the Malaysia poverty rate was 4.80% which is the percentage of the population living on less than US$5.50 a day, (World Bank).
This is ardently expressed by Khalid research paper at the London School of Economics and Political Science, where presented, the disparity among the Malay community – the top 1% – is very much acute then as it is likely to be accentuated:
The most important implication is that although the middle 40 per cent and the bottom 50 per cent benefited significantly from economic growth, the Bumiputera in the top income groups (the top 1 per cent and the 10 per cent) benefited the most from economic growth. In sharp contrast, the income of the Chinese in the top income groups deteriorated. In a way, the strong growth in high-income Bumiputera occurred at the cost of a decrease in Chinese and the slow growth of Indians in the top income groups; Khalid, Income Inequality and Ethnic Cleavages in Malaysia: Evidence from Distributional National Accounts (1984-2014), World Inequality Database, working paper No. 2019/09.
The World Bank Report has this to say:
“The bulk of inequality today can be explained by differences in socio-economic factors within ethnic groups rather than differences across groups. It is time to bring all Malaysians within the ambit of greater economic opportunity.”
The need to update Malaysia’s inclusiveness strategies reflects both new realities and new challenges. The new reality is that poverty is no longer the key issue when thinking about inclusive growth. Poverty still exists—and pockets of poverty remain deep and concentrated—but inequality is now in the spotlight and is presenting a tremendous challenge. The other new reality is that inequality is no longer what it was four decades ago. Nowadays over 90 percent of the level of inequality is explained by differences within ethnic groups rather than differences between these groups. Individual socio-economic characteristics, such as activity status, sector of employment, urban versus rural stratum, and educational levels in different geographical locations are despairingly displayed.
To undertake this task, according to Philip Schellekens, lead author of the Malaysia Economic Monitor, (World Bank, 2010).
“The dual approach in the Economic Transformation Program of combining cross-cutting policies with private sector-led projects provides an excellent platform. The proof of the pudding, however, will be in the consistent execution of policy reforms,” he said. “Also, until solid implementation of policy reforms is seen there is unlikely to be a groundswell of positive sentiment of foreign investors towards Malaysia.” (World Bank 2010, ibid).
The November 2010 issue of the Malaysia Economic Monitor offered another analysis of where Malaysia is today and where it could go tomorrow by updating its inclusiveness strategies. “Our recommendations on this highly charged topic do not come out of the blue — they are based on a detailed analytical study of the latest household income, labour force, and enterprise surveys, which the authorities have made available to our team. We are also leveraging on the experiences of other countries around the world, who have addressed or are coping with similar challenges.”
The implementation of an economic development plan requires the proficiency and professionalism of the public sector. This is where the effectiveness from the public service is under constant, and continuous, doubts.
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 whom,some alluded, to performing money-laundering.
This is heading a grueling question on total government debt and liabilitiesas 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).
As a share of revenue, a review done by the World Bank as far back as in 2011 has had 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).
In fact, by 2018, this percentage has increased to 34.3 percent for Malaysia, (seeWorldBank (2019). Malaysia Economic Monitor: Re-energizing the Public Service).
This is an extract from the World Bank 2019 Report on the challenges Malaysia has to confront to fulfill rakyat2 expections:
Can productivity performance objectives be executable or even achievable?
The second major restructuring requisite is the generation of government revenue to implement economic development programmes whilst supporting a top heavy, and inefficient, public sector – at a time when national fiscal revenue space is narrowing:
III] FINANCING ECONOMIC DEVELOPMENT
With those underlying facts, the key task is to source funds for economic development. This is well explored in (STORM 2023, Debt financing towards progressive economic path) where the nuances of the conversation are that since expenditures are 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 – besides restructuring Petronas, Khazanah and the GLCs -a higher revenue collection target that should coverage of a windfall tax on industries , 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, at a time when the manufacturing sector is moderating on its p erformance:
IV] PRAXIS IN ECONOMIC REJUVENATION
The economic development of a nation demands that its goal to attain high-income and developed nation status while ensuring that shared prosperity is also sustainable.
As one of the many Global South countries, Malaysia is one of the most open economies in the world with a trade to GDP ratio averaging over 130% since 2010. Openness to trade and investment has been instrumental in employment creation and income growth, with about 40% of jobs in Malaysia linked to export activities.
A government is always confronted with difficult decisions about appropriate measures under unforeseenable situations or in a crisis: what restrictions to impose and when to loosen them, where money will be spent and how it will be raised, and how to coordinate tasks between states and enable community cooperation.
These decisions have to take into account public health recommendations, economic considerations, and political constraints. Just as the policy responses varied – from the 2007–08 Global Financial Crisis, the dotcom 2002 burst and the Asian Financial Crisis in 1997 – so do national policy responses to the COVID-19 pandemic should differ for health, economic, and political reasons.
Play Politics
Why does the advice of independent consultants, analysts, and the academic go so often unheeded?
Political economy is about how politics affects the economy and the economy affects politics that Governments try to prime the economy before elections. However, business cycles are also creating ebbs and flows of economic activity and the circuitry of capital distribution around elections whence economic conditions have a powerful impact on elections. Politicians would manipulate these economic parameters to woo voters to gain political advantages, and contesting capital tries to support politicians.
Where are we now?
There is a cohort of powerful interests in favour of international trade and foreign investment. The world’s transnational corporations and international banks depend on an open flow of goods and capital. These are the monopoly-capitalists and the financial capitalists. This is especially the case today, when the world’s largest companies depend on complex global supply chains. A typical transnational corporation produces parts and components in dozens of countries, assembles them in dozens more, and sells the final products everywhere. Trade tariffs create barriers with these supply chains, thus the world’s largest companies are biggest supporters of freer trade.
That is why there is a need for perpetuating the mass of special and general interests in society so that these social institutions play a major role in national policymaking. The ways in which societies organize themselves – through and by economic sector, ethnicity, and importantly at this juncture of our political awareness, the class factor, shall affect how we would like to restructure our politics.
Definitely, political institutions have to mediate the pressures constituents bring to bear on them; even oligarch rulers have to pay attention to at least some part of public opinion. Political economists call this the “selectorate,” that portion of the population that matters to policymakers. In an authoritarian regime, this could be an economic elites or the ruling class or the armed forces. In an electoral democracy it would be voters and interest groups. No matter who matters, policymakers need rakyat2 support to stay in office.
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 Malaysian 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, then
(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, 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.
Therefore, as applied under a TAPAO approach, it would be sizing and averaging rural per capita income besides focusing on the country’s hinterlands, especially the mountainous interiors of Sarawak and Sabah.
Refining the geographical target of poverty reduction programs is a necessity. The TAPAO needs to shift from daerah² to kampung² including more likely some outside the list of poverty-stricken daerah, too. Collectively, those designated kampung² (villages) may cover a certain high percent of the country’s rural poor. Designated villages could then apply for projects to support local production and infrastructure (including makan-pada-kerja : food-for-work programs, worker training, and agribusiness development comprising technology extension services; not to be neglected, government-linked investments in social infrastructure (schools, clinics, community and recreation centers), with a particular strong participatory community-based self-help gotong-royong approach.
V] MADANI IMPLEMENTATION PRINCIPLES
For the SCRIPT in Madani Malaysia to be successful, in term of implementation and sustainability of a progressive politico-economic developmental praxis, working-class unity has to be consolidated.
It can only be further solidified if the tenet of divisive divisions by capitalism is better understood both in theory and in practice. Hence, we argue for a comprehensive yet bold project that is based on TAPAO that goes beyond its ethos as a renewal of an socialist ideal with Malaysian characteristics in order to take full account of the struggle of the labour movement.
Within the context of Malaysia development of underdevelopment – glaringly as in the cases of northeastern states in semanjung and the Borneo states of Sabah and Sarawak, and the many urban poors in the country as documented by the World Bank and UNICEF, we are witnessing the relational inequality generated. This is further reproduced by labour superexploitation and relational surplus value whence labour superexploitation is the essence of capitalism as neoliberalism is imperialism, too.
For Malaysia politico-economic model to be successful, and sustainable, the core issue of contradiction between capital and labour needs to be resolved with a Madani trustful outreach.
More so, after ethnocapital has owned, controlling and dominated the Malaysia resources, it is appropriate period of a new era under an unity governance to present a new narrative on Malaysian labour working cohesively and collaboratively – at this particular junction of a historical period – with capital to a shared prosperity domain under a common wealth practice for labour, too.
For one main obvious reality of capitalism is that massive poverty across the Global South is not the result of some local insufficiency (resources or skill talent) but rather due to the functioning of neocolonialism perpertuated by liberal economic policies as neoimperialism where the ongoing effects of dependency on financialisation capitalism need to be tamed.
The haemorrhage to present economy is the resulting outcome of those extractive institutional forces since post-independence, accelerated by succeeding regimes in governance with odious practices, and as articulated by Prof Kamal Hassan in Corruption and Hypocrisy in Malay Muslim Politics while Khalid’s London School of Economics and Political Science research has pinpointed the class structure-laden beneficiaries to their enduring enterprises.
The trust between labour and capital has to be firmed up solidly in fulfillment of a Madani Malaysia – more so when 98.5% of businesses are the SMEs contributing 36% of the national GDP where labour is important as capital because it provides employment for 7.3 million people – nearly half of the country’s workforce.
EPILOGUE
In short, we need to modify, adapt, and contextualize a conversation with our preceding political-economic reform agenda, and while trying to calibrate the sequence of, and the dimensions for, economic reforms – we seek to ask the pertinent question: have we really restructured the stagnated, and a doomed, national economy, ever ?
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.
What had been lacking through +6 decades in the economic development of the country is not due to lack of the vision or mission goals, but the inappropriate deployment of resources and the mishandling of allocated resources, overlaid by the socio-anthropological dimension with the burden of privileges that pulled back nation’s growth trajectory.
Glaringly, the civil service servants had been the dreadlocks that entangled the national productivity, then coupled with the trials of systemic odious practices – often enabled and or connivance with public service elements – have hung-dried an Asian tiger, (readSTORM 2023, Place, Position, Power of Public Sector).
To revisit 2010, when trying to meet the growth targets of the 10th Malaysia Plan, “it would require a significant rise in productivity and investment,” so said Philip Schellekens, lead author of the Malaysia Economic Monitor, (World Bank, 2010).
“The dual approach in the Economic Transformation Program of combining cross-cutting policies with private sector-led projects provides an excellent platform. The proof of the pudding, however, will be in the consistent execution of policy reforms,” he said. “Also, until solid implementation of policy reforms is seen there is unlikely to be a groundswell of positive sentiment of foreign investors towards Malaysia.” (World Bank 2010, ibid).
Also, while trying to achieve Malaysia’s Vision 2020 goal of high-income status, at that moment of an era, would require “a higher growth rate than that achieved in recent years,” so said World Bank Sector Director for Human Development, East Asia & Pacific, Emmanuel Jimenez, “the (other) challenge is also to ensure that the benefits are broadly shared across all layers of Malaysia’s society. While Malaysia has made truly impressive reductions in poverty, inequality persists at high levels.” (readfurther on race, class, poverty and inequality in malaysia new left, 2021).
After six and half decades of sustained neoliberalism economic developmental effort, the nation of Malaysia is still as accentuated in absolute income inequality as ever, (seelower right chart below)
Sources: World Bank datasets and DoSM statistics
Further expressing that “The bulk of inequality today can be explained by differences in socio-economic factors within ethnic groups rather than differences across groups. It is time to bring all Malaysians within the ambit of greater economic opportunity.”
This is ardently expressed by Khalid research paper at the London School of Economics and Political Science, where presented, the disparity among the Malay community – the top 1% – is much acute, and accentuated:
Some had articulated that it is the faulty education ecosystems, but while many Malaysians cannot take advantage of income-earning opportunities because they lack the skills to do so, then, despite massive investments in education, for many others, skill needs have changed more quickly than the availability of educational and training opportunities.
It begins to dawn to policy-implementors that as Malaysia seeks to increase knowledge and innovation in its economic activities, it is even more important not to marginalize the unskilled workforce who more likely than not is categorised under as underemployment and or performing zero-hour activities in the gig-economy with all attributes of extractive surplus value being emphasised, and endorsed within a capitalism praxis.
We seems to be living in an era not dissimilar to imperial ownership and control where wage growth remains very low while capital maximized investment returns through extracting surplus-value from labour.
The widening of absolute income gaps between the bottom 40 percent and the top 20 percent of the income distribution have only furthered the angered sentiment of being left behind.
Therefore, in complementary to education is the necessity of labour market reforms that raise the level of employment, streamline the regulatory environment for businesses and remove barriers for new investment.
However, even if income-earning opportunities exist and access to labour, it is still broadly inadequate because some Malaysians will inevitably remain excluded or require temporary support.
Thus, though important elements of a social protection system are in place in Malaysia, there are still many significant gaps remaining – distinctively displayed during the Covid-19 pandemic when income disparity within populace was further accentuated.
It was also a time when 70% of lower-income households cannot even meet monthly basic needs – indeed, more than 60% of these households reported having no savings at all – not much of a difference than 10 years ago:
and where these household expenditures are expansively spent on food:
But, not every poor, even urban, household has all the requisite food nor valued nutrients (UNICEF 2018):
In the study, Children Without – A study of urban child poverty and deprivation in low-cost flats in Kuala Lumpur, UNICEF unearthed:
Further, the state of Sabah gross domestic product per capita of RM5,745, compared with the national average of RM7,901, (read csloh , Sabah – a state underdeveloped) where the Borneo state’s poverty rate is three times that of the national average, and there is a high degree of inequality across districts, too:
One way out of this continous poverty trap is that social safety net programs should be more poverty-focus, targeting mechanisms have to be improved and fragmented programs could be replaced by a well-coordinated social protection system, (seeMalaysia Economic Monitor, November 2010 – Inclusive Growth).
Indeed, in the subsequent World Bank Report 2022, the social safety net resurfaced whereby the agency again with an urgency recommended that:
In the short term, financial support for the poor and vulnerable should continue. This includes a more inclusive social insurance framework with improved targeting. The continuation of cash assistance programs to support financially disadvantaged households will provide safety nets and much-needed protection from economic shocks.
The subsequent subsection is a Creative Commons reposted blog by PHILIP SCHELLEKENS, November 08, 2010, where he argued
Why Updating Malaysia’s Inclusiveness Strategies is Key
Compare South Korea and Malaysia in 1970 and compare them again in 2009. South Korea was a third poorer back then and is now three times richer. Even more remarkable has been South Korea’s ability to widely share the benefits of this spectacular feat across broad segments of society. South Korea’s strong focus on broad-based human capital development allowed the country to transform itself into a high-income economy, while at the same time reducing income inequality and improving social outcomes.
Malaysia’s inclusiveness strategies have produced some remarkable successes as well. Malaysia dramatically reduced poverty and has all but eliminated hardcore poverty. But the country has been far less than successful in reducing income inequality which, since 1970, steadily fell for two decades but has stagnated at high levels ever since. The last two decades also saw Malaysia’s growth model of high-volume low-cost production being challenged. Economic powerhouses emerged in the region, which led to more intense competition for talent, trade and FDI. For Malaysia to remain competitive, it became clear that it needs to compete on value, not cost, and this requires a refocusing on getting the incentives right for innovation, creativity and entrepreneurship.
The comparison with South Korea is partly flawed and unfair. For one, South Korea did not need to manage the ethnic tensions Malaysia was facing given the differences in demographic make-up. Also, South Korea was clearly an exceptional success story that few countries around the world have been able to replicate. On the flipside, Malaysia’s economic performance cannot be underplayed either. Indeed, the Commission on Growth and Development identified Malaysia as one in only 13 countries around the world that has since 1950 registered over a period of 25 years or longer an average growth rate of more than 7 percent.
Leaving these caveats aside, the sheer difference in growth performance, as well as South Korea’s remarkable success in improving social outcomes, is nevertheless instructive. The comparison offers some insights on what Malaysia could have achieved, andmore importantly can achieve in the future. This characterization also lies at the core of the recent self-diagnosis undertaken by the Government of Malaysia. The New Economic Model, the Tenth Malaysia Plan and the Economic Transformation Programme all speak to the need to update Malaysia’s inclusiveness strategies so as to realign them with the objective of becoming a high-income economy.
The need to update Malaysia’s inclusiveness strategies reflects both new realities and new challenges. The new reality is that poverty is no longer the key issue when thinking about inclusive growth. Poverty still exists—and pockets of poverty remain deep and concentrated—but inequality is now in the spotlight and is presenting a tremendous challenge. The other new reality is that inequality is no longer what it was four decades ago. Nowadays over 90 percent of the level of inequality is explained by differences within ethnic groups rather than differences between these groups. Individual socio-economic characteristics, such as activity status, sector of employment, urban versus rural stratum, and educational attainment are now the capital explanatory factors, no longer ethnicity.
Malaysia’s high-income aspiration is also raising a whole new set of challenges. High-income economies tilt the demand for labor in favor of the skilled, sharpening income inequality across the skills spectrum. They tend to specialize in product niches and concentrate activity in narrow geographical clusters, raising challenges to retrain people and move them around to where the new jobs are. They are also open to competitive forces, creating challenges for those who are unable to compete or unlucky as a result of such competition.
The November 2010 issue of the Malaysia Economic Monitor, which we are publishing today, offers an analysis of where Malaysia is today and where it could go tomorrow by updating its inclusiveness strategies. Our recommendations on this highly charged topic do not come out of the blue—they are based on a detailed analytical study of the latest household income, labor force, and enterprise surveys, which the authorities have made available to our team. We are also leveraging on the experiences of other countries around the world, who have addressed or are coping with similar challenges.
To fast-forward to the 2023 World Bank’s Malaysia Economic Monitor where the agency is strongly advocating digitalization of a new economy frontier (though critiques are that neoliberalism is modern imperialism assuming a new identity) promoting infrastructural platforms to cater for Global North monopoly-capital, but even then, there are resource limitations and social constraints that could, again, likely pull back the country’s ability and capacity to progress; simplified, it is primarily due to:
a) The lack of financial resources and digital skills have been cited as key constraints towards digitalization;
b) Even smaller formal firms relied on more traditional methods of payment, especially cash; and
c) Vulnerable segments of the population remain unbanked, despite the expansion of digital financial services.
These other matters pertinent to the national digitalisation process and an e-commerce economy shall be explored, and be expanded, in subsequent articles with differential dimensional approaches recommended to be undertaken when aiming for The Big Push.
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 distinctivearticulated 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).
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.
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.
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, (readSTORM, 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.
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 newsovereign 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.
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:
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
FitchSolutionAssessment
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 (seeEconomic Planning Unit, various years).
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.
Recently there are a number of content materials debunking the debt trap diplomacy myths in Sri Lanka and Africa. What is often not stated is the insidious role played by other private capital actors, too.
There are in a number of developing economies today when debt restructuring cannot inevitably occur without the full participation of foreign private creditors.
2. THE BOND-HOLDERS
Indeed, the low- and middle-income economies owed, at the end of 2021, an estimated US$9.3 trillion to foreign creditors, mostly to private creditors and trans-bordering bondholders hovering globally across multiple countries. Since majority of the outstanding payable is private debt, more often than not, bondholders would consciously purchase the right to collect in secondary markets, too, at times very much like vultures in a kill-feed.
Among this flock of bondholders, a small minority are regarded as vulture investors. They tend to focus on the distressed debt of governments, buying their bonds at a deep discount with the ultimate goal of suing a ruling government to collect the full payment.
These investors have little incentive to participate in debt-relief initiatives. To maximize their return, they hold out until other creditors make concessions – in the expectation that concessions from others will free up cash that enables the holdouts to collect the biggest possible payoff.
This is an unadulterated form of free-riding that hurts all other creditors, too.
3. THE GOVERNING BODIES
Governments have an invoking public interest to end this imbalance on such unfair transactions. It is timely, and a long-overdue process, for national governance stepping up to protect rakyat2 from third party monopoly-capital financial capitalism exploitation which directly is an expropriation of national wealth in Global South countries.
Granting distressed governments even a few of the legal protections routinely granted to distressed businesses would fix much of the problem. However, enacting them in just a few jurisdictions – like in Global North New York and London, for example – would only perpetuate the sovereign-debt contracts of developing economies as governed by the laws of these monopoly-capital financial centres.
The Common Framework – the debt restructuring program endorsed by the G-20 for 73 of the world’s poorest countries – might be one good approach to try out their alternative techniques.
Under the terms determined by the Paris Club, non-ODA (Overseas Development Aids) claims can be written off in whole or in part, while ODA claims are restructured.
However, ODA poses more problems than it solves.
First, the amount. Since 1970, developed advanced country (DAC) members had committed themselves to devote a minimum of 0.7% of their gross national income (GNI) to ODA. However, this threshold has never ever been reached. In 2019, total ODA was estimated at $155 billion, that is, only 0.3% of DAC GNI. This amount pales in comparison with the $485 billion remitted by the diasporas to developed countries during the same period.
Second, its composition. Contrary to what its title would suggest, ODA is not unconditional, disinterested and “humanistarian” aid. It is composed of grants but also of so-called “concessional loans”. It is therefore not uncommon for the annual net transfer of ODA for a “recipient” country to be negative. Similarly, the country is not free to use these sums as it sees fit, but is subject to a programme defined by the donor countries and/or international institutions.
Finally, its opacity. According to the data provided by the OECD, it is not possible to separate aid in the form of grants from aid in the form of loans. In order to artificially inflate its figures, the OECD has created a “grant-equivalent” category that includes not only said grants, but also low-interest loans with a long repayment period in order to supposedly better “reflect the real effort made by donor countries”.
In fact, the application of large-scale statutory process such as the Sovereign Debt Restructuring Mechanism is most of the time regarded as being defeated by its own ambition. Indeed, those recommendations by the World Bank and the International Monetary Fund are no more than loan-sharking along2preying on unfortunate victims.
4. THE DEBTORS
2021: low- and middle-income economies owed an estimated $9.3 trillion to foreign creditors, mostly to private creditors and bondholders
Sub-Saharan Africa is the region of the World that is the hardest hit by the IMF and its austerity policies ¹imposed through structural adjustment plans since the 1980s, the HIPC initiative since 1996 and since April 2020 the Debt Service Suspension Initiative (DSSI). Among the worst hit countries are Côte d’Ivoire, Madagascar, Niger, Senegal, Congo (Democratic Republic) Togo and numerous Central African countries.
In a significant number of developing economies today, debt restructuring cannot occur without the full participation of foreign private creditors. Most of the private debt, moreover, is owed to bondholders who often, explored above, purchase the right to collect in secondary markets.
About 40 low-income economies and six middle-income economies are either in debt distress or at high risk of it. For both types of economies, there is only one pathway towards restructuring unsustainable debt. This is either through the Paris Club for middle-income economies and the G-20’s Common Framework for Debt Treatments for low-income economies
However, both approaches have certain process hurdles. Typically, In return for debt relief from foreign government creditors, borrowing countries would have to wrangle equivalent concessions from foreign private creditors – the vulture capitalists – over whom they have no bargaining power.
Not surprisingly, progress has encountered problematic barriers. For instance, just three countries – Chad, Ethiopia, and Zambia – have sought relief under the Common Framework. More than a year after they applied, little administrative movement nor process resolution has been resolved adequately.
That is also consistent with the experience of the G-20’s Debt Service Suspension Initiative (DSSI), which urged (but did not require) borrowing countries to secure comparable concessions from private and government creditors alike. In the DSSI, only one “private” creditor participated, but that was simply a national development bank that identified itself as a private creditor.
4. CONCLUSION
The right to a second chance is enshrined in the corporate bankruptcy laws of most leading economies. Yet the same indulgence is denied to low-income governments with predictably grave consequences for the poorest rakyat2 in the poorest countries. At the end of 2021, governments in low- and middle-income economies owed an estimated $9.3 trillion to foreign creditors, mostly to private creditors and bondholders scattered across multiple countries.
For them, no bankruptcy court exists to ensure a prompt and orderly restructuring if a debt crisis approaches. Instead, they often have to pick their way through a procedural maze that is governed more by quaint conventions than by statute.
Governments have a compelling public interest to legislation to end this imbalance in foreign loan transactions. It is an overdue step to protect their own taxpayers from third party external monopoly-capital exploitation.
Consequently, the risk of a spate of debt crises is also rising – and yet the available mechanisms for tackling them are deeply inadequate and inappropriate because vulture capitalism flies high.
Time is also too short to permit the type of large-scale statutory solutions – such as the Sovereign Debt Restructuring Mechanism – that are designed in reality by a cohort of neoliberalism-is-neo-imperialism entities.
The UNICEF 2020 Report has shown that low income female-headed households are exceptionally vulnerable, with higher rates of unemployment at 32% compared to the total heads of households. Female headed households also registered lower rates of access to social protection, with 57% having no access compared to 52% of total heads of households.
The recovery of low-income families in Kuala Lumpur has been partial and uneven, with many still struggling to purchase enough food for their families while an increasing number of households have no savings.
Indeed, the national household debt-to-Gross Domestic Product (GDP) ratio had already surged to a new peak of 93.3% as at December 2020 from its previous record high of 87.5% in June 2020, according to Bank Negara Malaysia (BNM).
1] THE PERSISTENT POVERTY
i) That 7 in 10 households reported that Covid-19 had affected their ability to meet basic living expenses, with 37% saying they struggle to purchase sufficient food for their families. Another 35% are unable to pay their bills on time.
ii) That 68% of households had no savings, compared to 63% in December last year, while those who still had savings have seen the average figure decline by 35%. The situation is worse for female-headed households and heads of households with disabilities, where average savings are at RM342 and RM74, respectively.
iii) That while median household income has increased by 23% to RM2,233 in the months after strict restrictions on movement were lifted, the amount is still 10% lower compared to pre-crisis levels.
iv) That only 14% of heads of households expect their financial status to be better in the next six months, while 37% expect it to be worse. The majority remains pessimistic; though there are some signs of improvement compared to during the MCO.
Most families continue to pawn their valuables and have started to default on their rental payments as cash becomes scarce.
2] ENDURANCE IN EDUCATION
i) The restart of economic activities during the May to September 2020 had led to a 29% rise in monthly household expenditure, driven by spending on education and transport at 283% and 59% respectively.
ii) The extra expenses on education is also driven in part by face mask costs. About 38% of all heads of households and 46% of female-headed households reported difficulties in providing face masks to their children.
iii) About 65% of female-headed households find it difficult to provide pocket money, while 30% struggle to pay for transport fees.
iv) More of concern is a sizeable number of parents had said their children are demotivated, with nearly 1 in 5 parents reporting that their child had lost interest in school.
v) Online learning remains a major challenge due to the lack of suitable equipment. During the MCO, nearly 9 in 10 only used mobile phones as learning devices, and 8 in 10had no access to computers.
vi) The majority of parents do not want their children to learn online, as cramped living conditions meant that their children had no place to study. Others cite a lack of internet access or no computer, laptop or tablet.
The study suggests that children from low-income families are at risk of dropping out of school as a result of the combined financial and psychological impacts of the crisis.
3] CHALLENGES ON MENTAL HEALTH
i) Mental health remains a significant concern as 22% of heads of households reported feeling depressed or that they experienced extremely unstable emotions.
ii) 42% are worried about their financial conditions, while 32% are worried about not having enough money to buy food for their children and to support their children’s education
iii) Some household members are also experiencing new negative behavioural changes, with 27% of female heads of households experiencing tension and depression among family members.
B. POVERTY AND INEQUALITY
rakyat2 loathe a prime minister who tells citizens are poor because they are lazy, despite working countless hours or a cabinet who tells labour to work two jobs when they are already working 60 hours a week, enraged at a minister who tells rakyat2 not to spend beyond means when they are underpaid and living below the poverty line.
1] Where, 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.
2] Where the share of the wealth is acutely benefitting the high-income group of capital-endowed class – especially the top 1% of bumiputera ethnocapital class is way above the national income, and of, other communities incomes, too.
This is a decomposition of growth rate of real income per adult, 2002 to 2014 (pre-tax national income) : Khalid 2019
3] Where the difference between income earned, and wealth disparity, had been accentuated through the years :
5] Where the Department of Statistics Malaysia (DOSM) figures released had shown that the average monthly salary and wage received by workers in the country was RM3,224 in 2019; a typical apartment in the Klang Valley is one hundred times say on this basic monthly salary. Presently, there is a total of about 10 million salary and wage recipients in Malaysia. The Household Income & Basic Amenities Survey Report 2019 by DOSM showed that the country’s 2019 median income of a household of four is RM5,873. This means it is sixty times of both parents’ monthly salaries to get a decent shelter.
Malaysia’s 50 Richest 2020: Forbes. With globalisation, rentier capitalism attaches to the neo-imperial monopoly capitalism and its link to the global commodity chain dimension because of the multiple roles of rent intermediaries between capital and its accumulation; immediate consequence is capitalists accentuating wealth disparity with the working class.
On Engels thesis, present urban poverty reality has little to do with a lack of jobs or housing shelters , but rather it is firmly rooted in the mode of capitalism itself, and the exploitation and alienation of labour, upon which the system hinged.
ii) Indeed, throughout the 2002-2014 period, the poor population among bottom 50 per cent of rakyat2 has been consistent, that is, we are ALL still poor: 73 per cent were stillbumiputera, 17 per cent were Chinese, and 9 per cent were Indians:
iii) Presently, the top 20% of population – the T20 – possess 46.2% of the national income share, while M40 have 37.4% of the national income share but the bottom 40% of population – the B40 – only get 16.4% of the national income share of wealth.
2] DEBT MANAGEMENT
i) World Bank Group lead economist Richard Record had indicated that Malaysia has already depleted much of its available fiscal space and would emerge from the current pandemic crisis with a larger burden of debt and contingent liabilities despite the debt ratio had been approved by Parliament to increase from 55% to 60% of the gross domestic product (GDP). There would be difficult intertemporal constraints to further expand expenditures on relief and consumption-supporting stimulus over the near term.
This scenario shall leave national economy less endowed to invest in lasting recovery while maintaing growth in the future.
Even Moody Services had stated that the still-wide deficit for 2021 would increase the government’s fiscal consolidation challenge over the next few years. Further, any back-loading of efforts to reduce its debt burden over the year 2022 and 2023, will leave our national debt to the next generation of political leaders, and the present youth populace, to burden.
ii) Since 1997, the country had relied extensively on these Malaysian Government Securities for budget deficit financing where part of the budget deficits was financed by creating or printing new currency notes (“helicopters’ monies”). Also part of the debt papers was monetized; therefore, money supply and currency in circulation increased sharply since 1999:
“helicopters’ monies” circulating in the market since AFC1997Government issuance of new debit papers: floated upward in the AFC1997, then the bitcom burst of 2001, followed by the GFC2018 spike that continued upward thence; seeBudget Deficit and the Federal Government Debt in Malaysia by Mohamed Aslam and Raihan Jaafar, published: May 11th 2020 DOI: 10.5772/intechopen
In short, the amount of money floating around is not to generate wealth but within the circuit of financialization capitalism components of FIREs (finance, interests, real estate) are in furtherance of repaying mortgage loans, hire purchases, insurances, real estates tax dues and other debt interests.
iii) Therefore, it is contrary to reason that the government is more concerned with housing developers making high-rise profits than building affordable homes for ordinary Malaysians, particularly when one in four Malaysian families has yet to own a shelter. It is inconceivable, too, that a government refuses to increase the minimum wage (RM$1,200) when the poverty line is now almost double that amount at RM$2,208.
iv) It is difficult to believe that a country – rich in agriculutral resources, minerals endowment besides oil and gas reserves – has one in two of those with a monthly household income of below RM4,000 did not receive the Bantuan Sara Hidup Covid19 relief fund, while only 2% of the self-employed received the SME Special Grant.
v) The Employees Provident Fund (EPF) has revealed that out of Malaysia’s 22 million working-age population, 62% are self-employed, outside the formal labour force, and not covered by any form of social protection such as the EPF or government pension scheme.
Additionally, the low financial literacy rate of 36%, putting Malaysia well behind Singapore and Taiwan, leads to poor spending decisions. Indeed, 70% of Malaysians do not have a “rainy day” fund for emergency expenses, and subsequently high debt.
Yet, EPF contributors are urged to withdraw specific amount from their own accounts to sustain themselves during this stressful period than policy-makers be designing policies to address the deficient gap to reach the target groups as urged by Stephen Barrett, Unicef Malaysia’s social policy chief.
vi) Overall, social protection remains inadequate for low-income workers in the country, as 4 in 10 of those surveyed by the commissioned UNICEF and UNFPA longitudinal study – in partnership with DM Analytics, a Malaysia-based public policy and research led by Dr Muhammed Abdul Khalid – shows that low income families in Kuala Lumpur have been disproportionately affected by the COVID-19 crisis.
The study showed that seven per cent of children residing in Kuala Lumpur’s low-cost flats are living in poverty
3] TOWARDS EQUITY AND EQUALITY
i) Short-term – operational – cash aid should be continued to be the most useful assistance for the majority of low-income families, for instance, with rental exemptions being equally helpful.
ii) Mid-term – tactically – Dr. Rashed Mustafa Sarwar, Representative for Unicef in Malaysia, said the country must take opportunities created by the budget and within the 12th Malaysia Plan to rethink social protection in Malaysia “to ensure that no family, and no child, is left behind” (seeTowards A Post-2020 Political Economy; REFSA April 2021; blogs.World Bank 2021; PSM 2021, For a better Malaysia; Re-examining Urban Poverty: 2-hour webinar organised by the Center for Market Education, Embassy of Belgium and Bait Al Amanah, KualaLumpur, 15/4/2021).
iii) Long-term – strategically – we need tovisionise on building communal organizations and governance to step onto a progressive pathbeyond capitalism and the capitalist state in economic development and socioeconomic management, and towards a socialist undertaking that shall benefit everyone than the few.
1% own 43% of global wealth, while billions have no wealth at all.
Adopted from Paulo Nakatani and Rémy Herrera, The South Has Already Repaid its External Debt to the North: But the North Denies its Debt to the South, Monthly Review, June 2007, with updated adaptations on selective case countries, basing on (UNCTAD 2020, Developing country external debt: From growing sustainability concerns to potential crisis in the time of COVID-19); Eric Toussaint and Milan Rivié, Evolution of the external debt of developing countries between 2000 and 2019, Part 1,(2020); Threats over the external debt of Developing Countries Part 2 (November 2020); Developing countries in the stranglehold of debt Part 3 (April 2021); Eric Toussaint and Milan Rivié, An unsustainable burden of debt afflicts the peoples of Sub-Saharan Africa, Part 5 (May 2020); World Bank, International Debt Statistics 2021; Bank Negara Malaysia 2019, Profile of Malaysia’s External Debt – Bank Negara Malaysia; International Monetary Fund, The Debt Pandemic 2021; UNICEF, Families on the Edge, May 2021; UNFPA 2020.
1]INTRODUCTION
Since the onset of the global debt crisis in 1979 the transition and developing Global South economies had paid cumulative US$7.673 trillion in external debt service, seePaulo Nakatani and Rémy Herrera.
At the outbreak of the COVID-19pandemic, external debt stocks of developing countries and economies in transition reached US$9.9 trillion, their highest level on record, more than twice their value of US$4.4 trillion registered in 2009, and more than four-fold their level of US$2.2 trillion in 2000, (UNCTAD 2020).
The external debts of developing and transition countries reached 29% of their GDP in 2019. The short-term debts rose to more than one-quarter of the total external debts.
Debt service on long-term external public debt (PPG) in developing and transition economies is debt sustainability (SDG) 17.4.1 where it measures “debt service as a proportion of exports of goods and services”. This indicator reflects a government’s ability to meet external creditor claims on the public sector through export revenues.
[Explanation under #13Debt Servicing ¿].
This is of concern since low-income developing countries still rely predominantly on public financing to mobilise resources for structural transformation, yet also struggle the most with limited fiscal space given their shallow domestic financial and banking systems and limited options to refinance maturing debt obligations in the international financial markets.
The COVID-19 has translated into an ecological-epidemiological-economic shock that has put light to an epidemiological phenomenon to spotlight on the rapidly deteriorating debt sustainability in many developing countries. It threatens to turn what was already a dire situation prior to the pandemic into a series of sovereign defaults, (Rob Wallace, Alex Liebman, Luis Fernando Chaves and Rodrick Wallace, Covid19 and Circuits of Capital, Monthly Review, May 2020; John Bellamy Foster and Intan Suwandi, COVID-19 and Catastrophe Capitalism, Monthly Review, June 2020; Eric Toussaint and Milan Rivié).
2] GLOBAL SOUTH DEBT
During the same period their debt has increased from US$618 billion in 1980 to US$3.150 trillion in 2006, according to figures published by the International Monetary Fund (IMF). The external debt of this group of countries, comprising 145 member states, will continue to grow throughout 2007, according to the IMF, to more than US$3.350 trillion. The debt of the Asian developing countries alone could rise to US$955 billion, even though they have already repaid, in interest and capital, far more than the original amount due in 1980!
Malaysia 2019 external debt was RM$231225.9 million, (Asia Development Bank, External Debt Outstanding in Asia and the Pacific, Asian Development Outlook, April 2020).
3]STIMULUS PACKAGES
Total external debt service of the Global South countries grew from 2.8 percent of GDP in 1980 to 4.0 percent in 1989 and 6.9 percent in 1999, before decreasing slowly to 5.2 percent in 2006, just above the 5.1 percent average for the period.
Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said Malaysia’s statutory debt is expected to hit 58.5% of gross domestic product (GDP) in 2021 due to the implementation of an additional RM20 billion PEMERKASA stimulus package on 18th. March 2021 to safeguard the nation’s economic growth from the impact of the Covid-19 pandemic.
Whereas the previous Perlindungan Ekonomi & Rakyat Malaysia PERMAI Assistance Package introduced on 18th January 2021 – the fifth economic stimulus package to date worth RM15 billion spread over 22 initiatives aimed at combating the Covid-19 outbreak – was deemed to be inadequate.
The Finance Minister indicated that the government will exhaust and maximise the use of the RM65 billion ceiling for the Covid-19 fund approved by the Parliament under the Temporary Measures for Government Financing (Coronavirus Disease 2019 [Covid-19]) Act.
According to a report to the Asian Development Bank, in September 2020, by Donghyun Park, Arief Ramayandi, Shu Tian stating inter alia that borrowing heavily for fiscal stimulus packages to support growth and provide relief for vulnerable groups whilst at the same time, private companies and households may be forced to borrow more to survive the economic impact of COVID-19…..In addition, the economic downturn challenges their capacity to service their existing debts. Therefore, despite widespread concerns about the current escalation of public debt and its sustainability, we should not lose sight of the potential risk from possible surges of private debt…..
However, the national household debt-to-Gross Domestic Product (GDP) ratio had already surged to a new peak of 93.3% as at December 2020 from its previous record high of 87.5% in June 2020, according to Bank Negara Malaysia (BNM).
4] GLOBAL SOUTH WEALTH DISPARITY
that an increase in inequality is likely to mean more people in poverty, because at the bottom end of the income scale there will be more people further away from the average.
To the ever increasing concentration of wealth, at the national level in favour of the dominant classes of the countries of the Global South, and at an international level in favour of the countries of the Global North. It explains in large part, over the last few years, the dramatic increase in intra– and international inequalities, as well as the increase in relative and absolute poverty.
Income inequality has increased in most developed countries and in some middle-income countries, including China and India, since 1990, (United Nations, World Social Report 2020 – Inequality in a Rapid Changing World).
Countries where inequality has grown are home to more than two thirds (71 per cent) of the world population. Yet growing inequality is not a universal trend. The Gini coefficient of income inequality has declined in most countries of Latin America and the Caribbean and in several African and Asian countries over the last two decades. Despite progress in some countries, income and wealth are increasingly concentrated at the top. The share of income going to the richest 1 per cent of the global population increased in 46 out of 57 countries and areas with data from 1990 to 2015.
Malaysia case scenario by UNICEF 2020 showed that low income female-headed households are exceptionally vulnerable, with higher rates of unemployment at 32% compared to the total heads of households. Female headed households also registered lower rates of access to social protection, with 57% having no access compared to 52% of total heads of households.
Meanwhile, the bottom 40 per cent earned less than 25 per cent of income in all 92 countries with data (United Nations, 2019a). In the case of Malaysia, the bottom 40% of population – the B40 – only get 16.4% of the national income share of wealth as in 2020 – not much has the wealth disparity gap closed since two decades ago, but instead, more inequality has accentuated :
The undeniable fact as to why many bumiputera had not attained parity despite +60 years of neo-liberal-enforced economic development is the existence of a new class of compradore capitalist. 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.
Underlining this trend, the developing countries and “emerging market” economies had transferred to their creditors an annual average of 3.68 percent of their GNP during the decade following the debt crisis (1980–89). In the past ten years (1997–2006), marked by a series of financial crises and a growing polarization of the capitalist world system, this transfer rose to 6.2 percent of GNP, (Notes: The figures are for 1980–2006. Calculation by the authors based on the data provided by the International Monetary Fund: IMF, 2006, World Economic Outlook Database, September, Washington D.C. It is the sum of annual values drawn from the line External Debt: Total Debt Service” from the group “Other Emerging Market and Developing Countries, http://www.imf.org.)
Whereas in 2012 low-income developing countries spent 3.3 per cent of their government revenues to meet external public debt obligations, this figure rose to 8.1 per cent in 2018, falling only slightly to an estimated 7.9 per cent in 2019. The squeeze on government revenues from service payments on external public (PPG) debt was particularly drastic in Sub-Saharan Africa, where this ratio jumped from a low point of 3.3 per cent in 2011 to an estimated 18.2 per cent in 2019, (monthlyreview online May 2021).
Of ever increasing market integration and deregulation of capital movements, there has been a general transformation of debts to bonds on financial markets and a conversion of external debts into internal debts. This gradual evolution, which is still ongoing, hides some perverse effects, in particular that interest rates are often higher on internal debt.
It is more difficult towards a precise calculation of the size of the drain associated with this category of debts. All the more so because this transfer of surpluses from South to North continues to operate through different channels.
The disproportion of developing country debt, like the history of the monetary and financial international system, provides no indication of a solution to the current debt crisis if it is only the efforts and resources of these countries that are mobilized.
Economic, commercial, monetary and financial relations between the countries of the centre (North) and those of the periphery (the South) of the world capitalist system must be profoundly reorganized, according to new principles.
The transfer of surplus from South to North continues to operate through a myriad of channels, such as the repatriation of profits on direct foreign investment, transfer pricing, price trading, profits on the revaluation of bonds recorded as portfolio investments in balance of payments, non-compliance currency transfer and other forms of unequal exchange.
These could be augmentedly completed from the operational processes of TNCs to seek low labour arbitrage and low-cost production processes (like lean to just-in-time and flexible production) and by competitive strategic advantages with product differentiation in varied products with many features and multi-functionalities at various price structures in different marketspace.
By 2008, the top one hundred global corporations which had shifted their production foreign affiliates or subsidiaries accounted for 60 percent of their total assets and employment and more than 60 percent of their total sales. The foreign direct investment (FDI) to developing economies was US$694 billion in 2018 making up 58% global FDI share. By engaging in contractual relationships with partner firms but without equity involvement, mostly in the Global South, TNCs were generating about US$2trillion in sales in 2010 (UNCTAD, World Investment Report: Non-Equity Modes of International Production and Development (Geneva: United Nations, 2011), 131).
8]DEBT SELF-PERPETUATING
It is an undeniable fact that national debt from loans do not contribute to financing economic development. Inevitable that the debt itself is increasingly to cover repayment of interests and capital. So it functions as a self-perpetuating mechanism of poverty aggravation, work overexploitation, and a block on development in the economies of the periphery of the capitalist world system, (seeJohn Bellamy Foster, The Imperialist World, Monthly Review, May 2007).
This is due to developing countries (DC) very dependent on their respective commodities output and global prices. One can discern a correlation between the evolution of commodity prices and DCs’ external indebtedness.
From 1998 to 2003, a period that saw backflow of DCs’ capital towards the countries of the Global North, commodity prices were relatively low. From 2003-2004 on, those prices began a steep increase culminating in 2008. This phenomenon attracted investors and lenders from the Global North who were looking for countries offering guarantees based on their resources in commodities and their export revenues.
Thus, starting from 2008, there was a period of inflowing capital from countries of the North towards the DC. The governments and big private companies of the South were incited to take on more debt taking advantage of the super-cycle of commodities. Nevertheless there was a fall in 2009 due to the global crisis triggered by the major financial crisis of 2008 in the United States and Western Europe. Commodity prices rose again in 2010. In 2014 the cycle suddenly collapsed :
The end of the ‘super cycle’ coincided with a steady drop in DCs’ foreign exchange reserves in months of import. Whereas countries dependent on commodities are advised to hold at least three months of import in foreign exchange reserve, low income countries are now well below this threshold. With the new fall in oil prices in 2020, the drop in export revenues, the higher amounts to be repaid from 2020 onward, a number of countries, particularly oil exporting countries, may not be able to repay their public external debt :
The encroached interests of the dominant capitalists of the countries in the Global North collude in close collaboration with the elites of peripheral countries. These alliances often produced complex situations, such as “odious” debts (illegitimate and/or illegal), the transformation of external debts into public debts – which can often be viewed as forms of “odious” debts – and “ecological debts.” Odious debts were contracted by local elites and used against the public interest, to finance sumptuous expenses, corruption, or repression of the working classesmore often than not also inciting mounting community massacres and torture as briefly documented by Milan Rivié in Illicit Flows: Africa is the world’s main creditor (November 2020).
Illicit financial flows or financial transfers can be through:
i) “Tax and commercial IFFs”, which mostly consists of fraudulent issuing of invoices for products to be imported or exported, amounting to approximately 40 billion US$ per year;
ii) “illegal markets”, which are principally human trafficking and toxic waste;
iii) “Theft-type activities and financing of crime and terrorism”; and finally,
iv) IFFs linked to “corruption”
The amount of such colossal losses, US$89 billion per year according to the lowest estimates. This amounts to 3.7% of the continent’s GDP, and 25% of Egypt’s GDP, which is one of the three largest African economies alongside South African and Nigeria. It is also, almost equivalent to the total Official Development Aid, US$48 billion, and Foreign Direct Investment, US$54 billion, received by African countries per year :
However, the substitution of private debt by public debt was a way for countries to manage the debt crisis in favour of the local bourgeoisie in the clientel capitalism system as part of the ethnocapital rentier capitalism . When the USA decided to increase interest rates – in the hope of resolving their own crisis – many government of the peripheral capitalist countries at the beginning of the 1980s, nationalised a large part of the private external debt of the local bourgeoisie imposing responsibility for the cost of the operation on the population.
An international law on debt needs to be enacted, supplemented, as necessary, by measures requiring TNCs and their local allies of ethnocapital to pay to the countries of the Global South reparations for their “ecological debts.”
Increasing misery is existing across wide population spectrum in countries of the Global South, particularly in Africa. Between 1980 and 2006, more than US$675billion have been extorted to finance the debt service from the African continent, even though it is the poorest in the world.
As a yearly average during this period, this corresponds to $25 billion. By way of comparison, hardly more than half of this sum would be enough, according to the estimates of the UN Food and Agriculture Organization (FAO), to eradicate hunger, thanks to the provision of food rations corresponding to nutritional levels considered to be satisfactory to each poor inhabitant of the South.
Remember that according to the World Bank, there are over four billion poor people in the world, more than 850 million people still suffer today from malnutrition, and five million children die of starvation each year in the world. The wealth accumulated in the countries of the North is in part produced by exploitation of workers and destruction of nature in the countries of the South, (John Bellamy Foster, The Ecology of Destruction, Monthly Review, February 2007; The Conversation, What Karl Marx has to say about today’s environmental problems, June 2018; The Guardian, 9th September 2020).
11] HOUSEHOLDS DEBTS
Household debt also rose in emerging economies from 26 per cent of GDP in 2009 to 43 per cent by 2019. The bulk of the overall increase in lending to private non-financial sectors was lending to non-financial corporations in these economies, increasing from around 60 per cent of GDP just before the global financial crisis to over 100 per cent by 2017, where it is UNCTAD calculations, based on conversion to US dollars at market exchange rates, from BIS (2020) data.
Malaysia’s household debt-to-Gross Domestic Product (GDP) ratio surged to a new peak of 93.3% as at December 2020 from its previous record high of 87.5% in June 2020, according to Bank Negara Malaysia (BNM). “A concern over high household debt is that it may lead to a rapid deleveraging by households in the aftermath of a crisis, thus dampening or derailing economic recovery,” BNM warned in its Financial Stability Review for Second Half 2020 Report as released.
In the short term, many economists believe this high level of household debt-to-GDP ratio is manageable and do not pose that significant a risk to the country’s financial stability.
“From a macro perspective, it should not have a big impact on financial stability. Broadly, the risk from the household sector to the entire banking system remains manageable.
“BNM has taken pre-emptive measures and has the capacity to introduce further macroprudential tools if the financial environment requires it to,” said World Bank senior economist Shakira Teh Sharifuddin.
UOB (M) Bhd economist Julia Goh concurred, saying the high ratio is due to weaker GDP owing to the pandemic. It is also a result of government incentives to spur purchase of cars and property ownership.
“In a way, that has aided the recovery by supporting consumption amid a low interest rate environment. Other household financial stability indicators do not suggest higher risks so far given stable household financial asset-to-debt ratios and high excess savings.”
However, Institute for Democracy and Economic Affairs (IDEAS) chief executive officer Tricia Yeoh is sceptical of the lower-income households’ capacity to service their loans, and called on the government to reassess its policies to ensure economic recovery may be achieved without overstraining households.
Similarly, Socio-Economic Research Centre (SERC) executive director Lee Heng Guie highlighted the disproportionate impact of the pandemic on different levels of household income. “Clearly, there are segments of the household that are currently facing financial distress. My concern is for those who are highly geared, [who] will eventually go through a de-gearing process to rebuild their savings. This will in turn reduce consumption and curtail economic growth later,” he said.
However, there are three lingering concerns that need to be acknowledged, and be addressed:
i) If such high household debt levels persist, they may result in an unhealthy financial system that is fragile to future economic disruptions. Over the long term, if there is another downturn, and if the high level of household debt is not addressed, then definitely there is less room for monetary policy to take effect because households are already indebted to a high level.
The case of Malaysia: the bottom 40% of population – the B40 – only get 16.4% of the national income share of wealth as in 2020.
ii) There is an underlying issue on economic inequality, which, if not addressed, may pose systemic risk to the whole financial system.
iii) Then, there is the specter of income instability amongst the B40 group. Any shift in income, especially for lower-income households, will put them at risk of defaulting on these loans.
Malaysian household incomes are projected to fall by 12 per cent, which is est upimated amounted to RM$95 billion; and job losses are estimated to be of 2.4 million positions, 67% of which is unskilled labour, on the details that MIER released in 2020. Indeed, household debt – at nearly 83 per cent to gross domestic product – is among the highest in Asia.
12] PRIVATE EXTERNAL DEBTS
Concurrentwith the above issues are the high levels of private external indebtedness that are of concern since they represent a large contingent liability on public sector finances, ultimately backed by international reserves held in the domestic economy. In the event of wide-spread private sector debt distress, governments will have little choice but to transfer the bulk of distressed private debt to public balance sheets.
The fragility of developing countries’ debt positions was further increased by accompanying changes to the ownership of long-term external public (PPG) debt. The share of PPG external debt of developing and transition governments owed to private creditors reached 62 per cent of the total in 2019, compared to around 20 per cent in the 1970s and 41 per cent in 2000. Its most volatile component, public bond finance, is clearly on the increase relative to financing through commercial bank loans and other private creditors. This reflects the growing reliance of developing country governments on refinancing their external debt obligations in international financial markets with strong speculative features rather than borrowing from official bilateral and multilateral creditors, which is generally more stable and in more favourable terms.
However, amid the pandemic most government revenues collapsed alongside economic activity, while private capital flows came to a sudden stop :
In addition to new loans from multilaterals, Group of Twenty (G20) creditors granted a debt moratorium to the world’s poorest countries. They have encouraged private lenders to follow suit—albeit with little success, IMFThe Debt Pandemic
13] DEBT SERVICING
As cursory mentioned before, the rising external debt burden along with increased risk profiles of such debt shall translate into rising servicing costs. Debt service ratios are considered important indicators of a country’s debt sustainability.
In this sense, SDG indicator 17.4.1 measures “debt service as a proportion of exports of goods and services”. This indicator reflects a government’s ability to meet external creditor claims on the public sector through export revenues. A fall (increase) in this ratio can result from increased (reduced) export earnings, a reduction (increase) in debt servicing costs, or a combination of both. A persistent deterioration of this ratio signals an inability to generate enough foreign exchange income to meet external creditor obligations on a country’s PPG debt, and thus potential debt distress in the absence of multilateral support or effective sovereign debt restructuring.
It has been indicative that only high-income developing countries have maintained a stable ratio of external long-term PPG debt to export revenues of around two to four per cent in the last decade. This is largely due to their greater capacity to issue domestic public debt, with a view to avoid currency mismatches.
However, while greater reliance on local-currency denominated public debt reduces the vulnerability to exchange rate volatility, it frequently creates maturity mismatches.
In contrast, a marked increase of debt service ratios has been registered since 2012 across all other income categories: in middle-income countries this ratio rose from 3.1 per cent in 2012 to 6.9 per cent in 2019 and in low-income countries from 2.5 to 7.0 per cent. SIDS saw this ratio rise from a low point of 4.9 per cent in 2013 to 8.2 per cent in 2019. As these economies increasingly tapped into international capital markets, this reflects rising external public debt stocks since 2012 in a context of commodity price volatility, sluggish global economic growth and rising debt service, (UNCTAD 2020, World Investment Report 2020).
The Malaysia FEDERAL government debt and liabilities rose to RM$1.2569 trillion, or 87.3% of GDP, as at end-September 2020— up 7.5% in the first nine months of the year compared with RM$1.1692 trillion as at end-2019. Indeed, country’s revenue is not rising as fast as the increase in operating expenditure that is more than 95% of revenue since 2008. Assuming the economy is set to expand by 7.5% in nominal terms during 2021 to RM$1,521.3bil, Malaysia’s official debt to GDP and total debt to GDP is expected to rise to 64.1% and 77.9%, respectively in 2021, (The Star, 20 Mar 2021).
The debt service charges made up 14% (RM32.9 billion) of federal government revenue in 2019 and is estimated to take up 15.4% or RM34.95 billion of the government’s income in 2020. The amount is expected to rise even further to RM39 billion, or 16.5% of the government’s revenue for 2021, according to data in the Fiscal Outlook 2021 Report.
Even governments in high-income developing countries are often unable to issue long-term government securities at a sustainable rate of interest, yet they need to be able to pay off or roll over maturing short-term obligations.
14] REDEMPTION SCHEDULES
As a consequence of their rising indebtedness, developing countries face a wall of debt service repayments throughout the 2020s.
The redemption schedules for 2020 and 2021 already accumulated external public debt obligations alone amount to an estimated US$2 to 2.3 trillion in high-income developing countries and between US$700 billion to $1.1 trillion in low-and middle-income countries.
The challenge posed by large debt overhangs must, however, be placed in the wider context of economic challenges arising from the COVID-19 crisis. While developed countries are putting together massive stabilisation packages to flatten both the pandemic curve and the curve of economic and financial crisis, this is not an option open to many developing economies, at least not at the required scale.
On one hand, developing countries cannot easily lock down their largely informal economies effectively without more people being affected by hunger rather than by illness. On the other, they face substantive limitations on their fiscal space to mount rescue packages comparable to those currently under way in developed economies.
Seriousness in case country Malaysia is that general government debt jumps to 76.0% of GDP in 2020 from 65.2% of GDP in 2019. The debt figures used by Fitch include officially reported “committed government guarantees” on loans, which are serviced by the government budget, and the 1MDB’s net debt, equivalent in September 2020 to 12.6% and 1.3% of GDP, respectively. On this basis, the debt burden is significantly higher than the medians of 59.2% and 52.7% for the ‘A’ and ‘BBB’ rating categories, respectively; we have been degraded to BBB by Fitch last year. Malaysia’s debt is close to 400% of revenue, around three times the peer median.
15] GOVERNMENT REVENUESSHARE
Moving beyond SDG indicator 17.4.1, the share of government revenues dedicated to servicing PPG debt rose sharply over recent years, particularly in the poorest developing economies.
Whereas in 2012 low-income developing countries spent 3.3 per cent of their government revenues to meet external public debt obligations, this figure rose to 8.1 per cent in 2018, falling only slightly to an estimated 7.9 per cent in 2019.
The squeeze on government revenues from service payments on external PPG debt was particularly drastic in Sub-Saharan Africa, where this ratio jumped from a low point of 3.3 per cent in 2011 to an estimated 18.2 per cent in 2019. In other words, governments in this region now spend, on average, almost one fifth of their revenues on servicing external public debt, seeEric Toussaint and Milan Rivié, An unsustainable burden of debt afflicts the peoples of Sub-Saharan Africa, Part 5 (May 2020).
This is of concern since low-income developing countries still rely predominantly on public financing to mobilise resources for structural transformation, yet also struggle the most with limited fiscal space given their shallow domestic financial and banking systems and limited options to refinance maturing debt obligations in the international financial markets.
To pay for imports and to meet external debt obligations, the vast majority of developing countries are heavily reliant on access to hard currencies, earned primarily through commodity and service exports, such as food, oil and tourism, or received through remittances, as well as access to further concessional and market-based borrowing.
Their central banks cannot act as lenders of last resort to their governments to the extent central banks in developed economies can without risking a large depreciation of their local currencies and its effects in terms of steep increases in the value of foreign-currency denominated debt.
This has the potential to unleash destructive inflationary pressures. But with volumes of international trade experiencing a sharp contraction, core commodity prices in free fall, tourism at a virtual standstill, remittances drying up and private capital outflows from developing countries reaching unprecedented levels in recent history, many developing economies are increasingly cut off from conventional sources of income when they need them most.
On the respondibilities of central banking post-Global Finance Crisis: READ former deputy governor of Bank Negara Malaysia
17] DECISIVE ACTIONSBY COUNTRIES
It is against this backdrop that already existing debt vulnerabilities and distress in developing countries require decisive action to avoid liquidity constraints turning into wide-spread insolvency crises.
Early multilateral initiatives to provide some breathing space to hard-hit developing countries include US$215 million in debt cancellation by the IMF of repayments due by the 25 poorest developing economies between May and October 2020, as well as the G20 “Debt service suspension initiative for poorest countries” between May and December 2020.
There are 73 primarily low-income developing countries are eligible under the above-stated initiative that could see the temporary suspension of up to around $18 billion in repayments on official bilateral debt. While these initiatives are welcome, they are unlikely to be sufficient in either scale or scope.
It has to be noted, however, new borrowing, for example in fast growing COVID-19 bond markets as well as through increased access to concessional multilateral lending, can help bridge immediate liquidity needs but it is bound to add to, rather than resolve, unsustainable external debt burdens. Well-designed debt relief – through a combination of temporary standstills with sovereign debt reprofiling and restructuring – will therefore be essential to address not only immediate liquidity pressures, but also to restore long-term external debt sustainability in many developing countries, not least with a post-COVID-19 view of achieving the 2030 Agenda for Sustainable Development, ( seeUNCTAD (2020b) for more detail ).
Refer to Point #3 above regarding Malaysia PERMAI and the PEMERKASA stimulus packages
18] CADTM
Contrary to the dominant discourse, it is actually the case that the 54 African states finance developed countries and not the other way round. Similarly to the CADTM, the UNCTAD report also supports this claim. With IFFs rising to 836 billion dollars from 2010 to 2015, and an external debt of 770 billion dollars in 2018, “the continent [is] being labelled a ‘net creditor to the world’”.
However, the countries at the centre of the world capitalist system and their multilateral monetary and financial institutions, above all the IMF, the World Bank, and the Paris Club – all have no interest in resolving the problem of external debt, because it represents a reliable means of keeping the countries of the South in perpetual dependence.
The structure of the external debt of developing countries from the point of view of creditors (rounded-off figures as provided by the World Bank on the indebtedness of developing countries in 2018) :
This comes about as an outcome of the Bretton Woods Agreement whose focus was to construct an international monetary order centered on the U.S. dollar. Other currencies were to be pegged to the US dollar, which was in turn pegged to gold, (seeCheng Enfu and Lu Baolin, Characteristics of Neoimperialism, Monthly Review, May 2021).
The U.S. dollar has played the prominent role in world currency, since replacing the British sterling pound, thus designating the U.S. a dominant global positioning. As such, the U.S. dollar makes up 70 percent of global currency reserves, accounting for 68 percent of international trade settlements, 80 percent of foreign exchange transactions, and 90 percent of international banking transactions. Owing to this financial dominance, the U.S. dollar has also become the internationally recognized reserve currency and trade settlement currency.
Often, serious financial hardship for a number of countries is dependent on revenues from oil, agriculture or minerals. This factor has been aggravated by the devaluation of currencies of countries from the South against the US dollar, seeEric Toussaint and Milan Rivié, Developing countries in the stranglehold of debt, Part 3 (April 2020).
The United States can also obtain international seigniorage by exporting U.S. dollars. She can reduce its foreign debt by depreciating the U.S. dollar or assets that are priced in U.S. dollars. The hegemony of the U.S. dollar has also caused the transfer of wealth from debtor countries to creditor countries. This would, in fact, mean that poor countries would subsidize the rich.
Neoimperialism is monopolistic financial capitalism established by large transborder multinationals whose production and capital are “concentrated into fewer and fewer hands.” (seeJohn Bellamy Foster, Robert W. McChesney, and R. Jamil Jonna, “Monopoly and Competition in Twenty-First Century Capitalism,” Monthly Review 62, no. 11, 2011 :1).
Neo-Imperialism monopolizes almost all sources of raw materials, scientific and technological talent, and skilled physical labour in all fields, controlling the transportation hubs and infrastructural platforms by various modes and means of production – and by owning, controlling and dominating capital, global financial functions and associated derivatives and information technologies through vast cultural and military shareholding systems, it has
1947, in the Swiss Resort named after: Mount Pelerin Society (MPS) held its first conference. The 39 members were economists, historians, philosophers, businessmen and where nine members later became Nobel Laureates — Hayek, George Stigler, Maurice Allais, Gary Becker, Milton Friedman, James Buchanan, Ronald Coase and Vernon Smith in Economics, and Mario Vargas Llosa in Literature.
1] INTRODUCTION
The MPS’s influence is to spread through opinion makers in journalism and think-tanks, supported by billionaire like Charles Koch. The think-tanks included the Institute of Economic Affairs (UK), Council on Foreign Relations, the Atlantic Economic Research Foundation, the Heritage Foundation and Ford Foundation, Hoover Institution, Foundation for Economic Education, American Enterprise Institute, Center for American Progress, Canadian Fraser Institute and Australian Institute of Public Affairs supported by plutonic billionaire families-like of George Soros, Michael Bloomberg, and Glenn Hutchins, (seeLaurence H. Shoup, Monthly Review, May 2021 on key policy formulation and outcomes of major USA think-tanks).
However, much of the intellectual work was completed by University of Chicago’s Milton Friedman, Ronald Coase and George Stigler – working on free trade, the importance of property rights, political freedom and minimal state interference and low taxes.
These neo-liberal views were taken up by UK prime minister Margaret Thatcher (1925-2013) and US president Ronald Reagan (1911-2004), with nearly one third of latter economic advisers being MPS members. The neo-liberal philosophy and its application in economic policy eventually morphed into as the Washington Consensus, first articulated by World Bank economist John Williamson.
The concentration of neoliberal elites and circulation of neoliberal ideals amongst the political class.
2] NEO-IMPERIALISM AS NEW MONOPOLY IN PRODUCTION AND CIRCULATION
The internationalization of production and circulation, together with the intensified concentration of capital, monopolostic transnational corporations (TNCs) whose wealth is nearly as huge as that of many countries, for examples, in 2017 Walmart earned more than the whole of Belgium; Netflix had a greater revenue in 2017 than Malta’s GDP; Apple would be 47th in the world by GDP if it were a country.
The tendency towards the international concentration of capitalism is clearly reflected from Lenin’s contestaton (Imperialism, the Highest Stage of Capitalism, New York: International Publishers, 1939) which points out that imperialism is the monopoly stage of capitalism where markets became competitive stages for global and regional hegemony.
To broaden capital intrusion there is “competition” between firms to seek low labour cost (economic term: labour arbitrage) and low-cost production processes (lean to just-in-time and flexible production), competition for resources and markets (strategic competitive advantages) and marketing on product differentiation (varied products with many features and multi-functionalities at various price structures in different marketspheres).
By 2008, the top one hundred global corporations which had shifted their production foreign affiliates or subsidiaries accounted for 60 percent of their total assets and employment and more than 60 percent of their total sales. The foreign direct investment (FDI) to developing economies was US$694 billion in 2018 making up 58% global FDI share. By engaging in contractual relationships with partner firms but without equity involvement, mostly in the Global South, TNCs were generating about US$2trillion in sales in 2010 (UNCTAD, World Investment Report: Non-Equity Modes of International Production and Development (Geneva: United Nations, 2011), 131).
Between 1980 and 2013, benefiting from the expansion of markets and the decline in production factor costs, the profits of the world’s largest 28,000 companies increased from US$2 trillion to US$7.2 trillion, representing an increase from 7.6 percent to approximately 10 percent of gross world product, (see Richard Dobbs et al., Playing to Win: The New Global Competition for Corporate Profits (New York: McKinsey & Company, 2015).
Under capitalism, the capitalists are dominant at each level of society, the working proletarians are dominated at each and every stage of labouring activities. When class exists at each economic, political, and ideological (or cultural) level, the understanding of class relationship is to identify where the controlling power ensues. As an instance, the stronghold in the Free Trade Zone (FTZ) or the Export Free Trade Zone (EFTZ) is that of monopoly-capitalism [place] that has aligned with the political elites and compradore capital of a developing country [positions], and by ownership and control of assembly workers [power] is able to extract the surplus value through their labouring tasks.
Those were the resultant outcomes of neoliberalism “free trade” ethos.
3] NEW MONOPOLY OF FINANCE CAPITAL
Secondly, the progress of capitalism to control and concentration generates a malformed development process towards economic financialization.
The international concentration of capital invertibly gives birth to international monopoly-finance capital that ensues the emergence of financialization capitalism (see John Bellamy Foster, The Financialization of Accumulation, Monthly Review vol:62, issue 05 October 2010). Financialization capitalism becomes prominent because the TNCs are unable to find sufficient investment outlets for their huge economic surpluses from production, increasingly turn to speculation within the global financial sphere, (see John Bellamy Foster and Fred Magdoff, The Great Financial Crisis (New York: Monthly Review Press, 2009). Even households had began to be financialized, too (seeCostas Lapavitsas, The Era of Financialization, Part 3, TripleCrisis).
From the research of Cheng Enfu and Lu Baolin (Monthly Review May 2021), it is found that the proportion of overseas profits within total profits of U.S. corporations increased from 5 percent in 1950 to 35 percent in 2008. The proportion of overseas-retained profits increased from 2 percent in 1950 to 113 percent in 2000. The proportion of overseas profits within the total profits of Japanese corporations increased from 23.4 percent in 1997 to 52.5 percent in 2008, (Cui Xuedong, “Is the Contemporary Capitalist Crisis a Minsky-Type Crisis or a Marxist Crisis?” [in Chinese], Studies on Marxism 9 (2018).
By a slightly different accounting approach, it was acknowledged that the share of foreign profits of U.S. corporations as a percent of U.S. domestic corporate profits had increased from 4 percent in 1950 to 29 percent by 2019, (John Bellamy Foster, R. Jamil Jonna, and Brett Clark, “The Contagion of Capital,” Monthly Review 72, no. 8 (January 2021): 9).
Further, world wide, within twenty years since 1987, debt in the international credit market soared from just under $11 billion to $48 billion, with a rate of growth far exceeding that of the world economy as a whole, (Cheng Enfu and Hou Weimin, “The Root of the Western Financial Crisis Lies in the Intensification of the Basic Contradiction of Capitalism” [in Chinese], Hongqi Wengao 7 (2018).
4] MONOPOLY OF US$ DOLLAR AND INTELLECTUAL PROPERTY
Again, in Imperialism: The Highest Stage of Capitalism, Lenin stated: “Typical of the old capitalism, when free competition held undivided sway, was the export of goods. Typical of the latest stage of capitalism, when monopolies rule, is the export of capital.” (Lenin, Selected Works, 212).
July 1944, on the initiative of the U.S. and British governments, representatives of forty-four countries gathered in Bretton Woods, New Hampshire, to discuss plans for a postwar monetary system. The documents Final Act of the United Nations Monetary and Financial Conference, Articles of Agreement of the International Monetary Fund, and Articles of Agreement of the International Bank for Reconstruction and Development – collectively known as the Bretton Woods Agreements – were adopted. The Bretton Woods main focus was to construct an international monetary order centered on the U.S. dollar. Other currencies were to be pegged to the US dollar, which was in turn pegged to gold.
The U.S. dollar thus plays the prominent role in world currency, while replacing the British sterling pound but designating the U.S. a special position compared to the rest of the world. Henceforth, U.S. dollar makes up 70 percent of global currency reserves, accounting for 68 percent of international trade settlements, 80 percent of foreign exchange transactions, and 90 percent of international banking transactions. Owing to this financial dominance, the U.S. dollar becomes the internationally recognized reserve currency and trade settlement currency. On one aspect, not only the United States is able to exchange it for real commodities, resources, and labour, and thus to cover its long-term trade deficit and fiscal deficit, but can also make cross-border investments, mergers and acquisitions of enterprises using U.S. dollars.
In a sense, the U.S. dollar hegemony provides one good example of the predatory nature of neoimperialism. The United States can also obtain international seigniorage by exporting U.S. dollars. She can reduce its foreign debt by depreciating the U.S. dollar or assets that are priced in U.S. dollars. The hegemony of the U.S. dollar has also caused the transfer of wealth from debtor countries to creditor countries. This would, in fact, mean that poor countries would subsidize the rich, which is completely and utterly unfair.
The other related financial instrument is the Intellectual Property Rights (IPR) which is a monopoly property. Intellectual property includes product design, brand names, and symbols and images used in marketing. These are protected by rules and laws covering patents, copyrights, and trademarks. Figures from the UN Conference on Trade and Development show that royalties and licensing fees paid to multinational corporations increased from $31 billion in 1990 to $333 billion in 2017, (United Nations Conference on Trade and Development, World Investment Report 2018).
According to figures from Science and Engineering Indicators 2018 Digest, released by the National Science Council of America in January 2018, the total global cross-border licensing income from intellectual property in 2016 was $272 billion. The United States was the largest exporter of intellectual property, with such source income at 45 percent of the global total.
With the TRIPs/WTO (Agreement on Trade-Related Aspects of Intellectual Property Rights) as an international legal agreement between all the member nations of the World Trade Organization), the intellectual property regime has only strengthened, henceforth, (Cédric Durand, William Milberg, Intellectual Monopoly in Global Varlue Chains, 2018).
5] NEW MONOPOLY OF INTERNATIONAL OLIGARCHIC ALLIANCE
The fourth point is that with permeability of neoliberal thinkings prod a string of international monopoly alliance of oligarchic capitalism, featuring thereby a hegemonic ruler and several other great powers. This introduction is to provide the economic foundation for the money politics, vulgar culture, and military threats that exploit and oppress on the basis of the monopoly, as articulated by Cheng Enfu and Lu Baolin in Monthly Review May 2021, ibid).
Examples of international monopoly economic alliance as dominated by the United States are the 1975-formed G6 group with the United States, United Kingdom, Germany, France, Japan, and Italy, and became G7 when Canada joined the following year. G7 and its monopoly organizations are the coordination platforms, while the International Monetary Fund (IMF), the World Bank, and the World Trade Organization are the functional bodies of the new Bretton Woods global order of economic governance international capitalist monopoly alliance manipulated by the United States to serve its strategic economic and political interests, (Youzhi and Zha Junhong, “The Evolution and Influence of the G7 Group after the Cold War” [in Chinese], Chinese Journal of European Studies 6, 2002).
Other hegemony entities shall comprise the North Atlantic Treaty Organisation (NATO) and regional collections like ANZUS — the Australia, New Zealand and U.S. Security Treaty, Moroccan-American Treaty of Friendship, The US-Israel Strategic Partnership, The U.S.–Afghanistan Strategic Partnership Agreement, the QUAD in an India-Pacific coalition, PRISM and the Five-Eye program as part of multilateral UKUSA Agreement – a treaty for joint cooperation in signals intelligence.
6] ECONOMIC ESSENCE AND TREND
The final characteristic of neoliberalism is the globalized contradictions of capitalism and its various crises of the system creating contemporary capitalism as late imperialism (Patnaik 2016), where U.S. political scientist like Joseph Nye had articulated that soft power may be applied to accomplish one’s desires through attraction rather than force or purchase.
It is often presented that the soft power of a country is constituted mainly of three resources, namely, culture (which functions where it is attractive to the local population), political values (which function when they can actually be practiced both at home and abroad), and foreign policy (which functions when it is regarded as conforming to legality and as enhancing moral prestige), see Wang Yan, “Review of Research on the Index System of Cultural Soft Power” [in Chinese], Research on Marxist Culture 1 (2019).
The United States subjugates the cultural markets and information spaces of other countries, especially developing countries, by exporting to them U.S. values and Hollywood lifestyles, with the goal of making its culture the “mainstream culture” of the world, (see Hao Shucui, Research on Marxist Culture 1, 2018) from Ford Foundation, Rockefeller Foundation, Mont Pelerin Society, and Center for International Private Enterprise to promotion of “color revolutions” – through Albert Einstein Institute (AEI), National Endowment for Democracy (NED), International Republican Institute (IRI), National Democratic Institute (NDI) – by controlling the field of international public opinion via the promotion of neoliberal values by funding seminars and academic organizations, and through broadcasts by Voice of America and CNN or publications in Bloomberg, USAToday, New York Times, and increasingly since 2009, the US Agency for Inter-national Development (USAID)’s Interagency Counterinsurgency Initiative became official doctrine in the US. Now, USAID is the principal entity that promotes the economic and strategic interests of the US across the globe as part of its counterinsurgency operations.
The British assisted in scripting an economic policy known as the Draft Development Plan that would became the Malaya Plans (1955-60); also implemented was the Second Malaya Plan 1961-65.
There seems to be a greater deference to foreign economic advisers who not only represent the neoliberal interests of international economic agencies but also enhancing the foreign business interests that successed in penetrating wholesomely the national economy.
a) Then, the subsequent three Malaysia Plans that followed were said to be crafty masterminded by foreigners from the United States of America. In fact, the earliest Malaysia Plan was drafted with the advice of Warren Hansbuger from USA; the second plan was completed by Prof. V.M. Bernett, Dr. D. Snodgrass and Prof. H.J. Bruton, all from the USA; though Snodgrass had pointedly admitted that these programmes were to gain “support from the rural Malays, if not indeed for the leadership of UMNO itself” rather than as a wholesome beneficiary to the rakyat-rakyat. The third plan had the advice of Prof. B. Higgins, also from the USA. The Development Advisory Service of Harvard (DASH) was heavily involved with the Prime Minister Economic Planning Unit (EPU) in drafting and promotion of this suite of development programmes.
Later in 2010, the government think-tank – Performance Management on Delivery Units (Pemandu) – even had allocated RM66 on “external consultants”, including American consultancy firm McKinsey and Co, which took the lion’s share of an estimated RM36 million; other foreign consultants included the Hay Group (which was paid RM11 million), Ethos & Co (RM1.5 million) and Alpha Platform (M) Sdn Bhd (RM1.5 million); an undisclosed “external consultant” named “Tarmidzi” had also received RM3 million for work done in setting up Pemandu as part of a neoliberalism economic development collaboration.
During 1997 currency crisis, and the eventual financial meltdown in 1998, the Malaysian government initial response was to rely on the International Monetary Fund consultancy response requiring expenditure reduction policies, that is, tighter fiscal and monetary control, which most unfortunately exacerbated the recessionary situation within the country concurrent with sharp portfolio capital outflow (see Athukorala 2000, “Capital Accounts Regime, Crisis, and Adjustments in Malaysia”, Asian Development Review 18, No:1 ,pp:17-48 and Bird & Rajan 2000, besides Kaplan and Rodrik 2001, “Did the Malaysian Capital Controls Work?”, NBER Working Paper No:8142).
b) TNCs deployment abroad is a manifestation towards capitalism late imperialism notation of labour arbitrage. On one side, the political economies of newly independent countries encourage foreign investment from Global North monopoly-capital. On the other perspective, through the application of global labour arbitrage where, as a result of the removal of or through the disintegration of barriers to international trade, jobs and industries have since moved to nations where labour and the cost of doing business is with low-pay and operational costs are inexpensive, respectively. This approach, together with labour value commodity chains, contributes to the enlarged capital accumulation by the transnational corporations, deepening the extracting surplus value from the labouring class.
However the uneven labour employment was to be seen in the Second Malaysia Plan, 1971-1975, where it had proposed that 22% of the 495,000 new jobs to be created in peninsular Malaysia would be in the manufacturing sector. This means a three folds increase in employment in the manufacturing sector from the 1960 figure of 121,000 to 378,000 by 1975. Past performance had shown that the low employment absorption capacity in the manufacturing sector, especially in the pioneer companies; in fact, the manufacturing sector provided only 5,500 new jobs per year during 1966/67,(Lo Sum-Yee, The Development Performance of West Malaysia, 1955-1967, with special reference to the industrial sector, Heinemann, Kuala Lumpur, 1972, Chapter 7, pp.66-73 and E.L. Wheelwright, Industrialisation in Malaysia, University of Melbourne Press, 1965, Chapter 4, pp.62-70).
c) Thirdly, without promulgated regulations, financial monopoly capital is very likely to work against the vision and goals set by country for her industrialisation initiatives. The insurgent of capital financialization in the late 1990s had already created an increased circulation of paper instruments and their associated debts :
Government issuance of new debit papers: floated upward in the AFC1997, then another sitcom burst splurge 2001, followed by the GFC2018 spike with “helicopters’ monies” circulating in the market since AFC1997; seeSTORM 2020
d) Forty-five years after the New Economic Policy (NEP) implementation, by 2002, Malaysia’s inequality remains extremely high: its top 1 per cent income share was 19 per cent and the corresponding number for the top 10 per cent was 44 per cent which is higher than those of the US and substantially even higher than those of China :
where it is deduced that the top 1% of Bumiputera is way above the national income, and other communities incomes, (as extracted from a decomposition of growth rate of real income per adult, 2002 to 2014 (pre-tax national income) : Khalid 2019
e) The unpleasantness on why many Malays had not attained parity despite +60 years of neo-liberal-enforced economic development is the emergence of a new class of compradore capitalist. With post-industrialidation and the introduction of financialization capitalism, the role of clientelship capitalism had inserted into the monopoly-capital supply chain in an age of imperialism. Corporate capital in the SMEs collaborates with Global North to tighten the commodity supply chain with monopoly-capital M&E vendors like AIDA, SKF, Cohu, VAT, Oerlikon Balzers, Favelle Favco, Bromma, Vitrox, etc.; recently, Digi, Nestles and British American Tobacco are, by market capitalisation, leading the list of foreign companies that dominate our local businesses.
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.
h) That what is widely referred to as neoliberal globalization in the twenty-first century is in fact a historical product of the shift to global monopoly-finance capital.
Jason Hickel, Dylan Sullivan and Huzaifa Zoomkawala contended in the New Political Economy– published online: 30 Mar 2021 – 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 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; and we are unfortunately one of the politico-economic victims in this neoliberalism niche.
8] CONCLUSI0N
The character of neoimperialism is that it is a monopolistic financial capitalism established on the business model of giant and expansive transborder multinationals. The production monopoly and financial monopoly of the transnational corporations have higher stage of production and capital concentration, whereby “nearly every industry is concentrated into fewer and fewer hands.” (see John Bellamy Foster, Robert W. McChesney, and R. Jamil Jonna, “Monopoly and Competition in Twenty-First Century Capitalism,” Monthly Review 62, no. 11, 2011 :1).
International monopolistic financial capital not only controls the world’s major industries, but also monopolizes almost all sources of raw materials, scientific and technological talent, and skilled physical labour in all fields, controlling the transportation hubs and infrastructural platforms by various modes and means of production. It owns, controls and dominates capital, global financial functions and associated derivatives and information technologies through vast culutural and military shareholding systems, (Li Shenming, “Finance, Technology, Culture, and Military Hegemony Are New Features of Today’s Capital Empire” [in Chinese], Hongqi Wengao 20, 2012).
October 1984, Deng Xiaoping stated: “There are two major problems in the world that are very prominent. One is the issue of peace and the other is the North-South issue. Deng emphasized that “peace and development” were the two major questions to be resolved, (Li Shenming, “An Analysis of the Age and Its Theme” [in Chinese], Hongqi Wengao 22, 2015), not perpetuating endless wars and destructive extractions upon Mother Earth.
EPILOGUE
Progressive nations working together to build a shared socialist community for the better future for humankind.
Over the past 30 years, only 33 countries have made the transition to high-income status
That economic growth since independence gained a generation ago has not benefited all rakyat2 equitably, including slower income growth especially among younger and lower-skilled workers, inequitable access to quality education, and inadequate social safety nets for the poor is a testimony that neoliberal economic development under capitalism does not benefit anyone but a class of ethnocapital colluding with compradore corporate capital in taking on a new phase in the globalization of production and finance with monopoly-capital collaboration.
Whereas an ethnocratic governance is representatives of an ethnic group that is holding a disproportionately large number of public posts to advance their ethnic group to the disfranchisement of others, the ethnocapital in this country is specifically the Malay-dominated kleptocrates who had lorded over the country since 1957.
Succeeding oligarchy regimes had continued maintaining a clientel ethnocapitalism domitnation over the working class rakyat2 with 1% of the bumiputera population (seeKhalid lse.blog) or about 40,000 ethnocapital political families running and looting – and ruining – the national economy. The undeniable fact as to why many bumiputera had not attained parity despite +60 years of neo-liberal-enforced economic development is the existence of a new class of compradore capitalist. With post-industrialidation and the introduction of financialization capitalism, the role of clientelship capitalism had inserted into the monopoly-capital supply chain in an age of imperialism. Corporate capital in the SMEs collaborates with Global North to tighten the commodity supply chain with monopoly-capital M&E vendors like AIDA, SKF, Cohu, VAT, Oerlikon Balzers, Favelle Favco, Bromma, Vitrox, etc.; recently, Digi, Nestles and British American Tobacco are, by market capitalisation, leading the list of foreign companies that dominate Malaysian businesses in alliance with Global North monopoly-capital – all in furtherance of neo-imperialism penetration that by now the country is an ownership of a failed state, (seeAliran 2021).
That capitalism fails as a good society is evident from a simple examination of its main features. Capitalism is not towards human development but privately accumulated profits by a tiny minority of the population. The implication is that although the middle 40 per cent and the bottom 50 per cent benefited significantly from economic growth, more glaringly is the ethnocapital Bumiputera in the top income groups (the top 1 per cent and the 10 per cent) benefitted the most from economic growth :
whereby the top 1% of Bumiputera is way above the national income, and other communities incomes, too. This is a decomposition of growth rate of real income per adult, 2002 to 2014 (pre-tax national income) : Khalid 2019
Indeed, even thirty years after the NEP (New Economic Policy) implementation, by 2002, Malaysia’s inequality level was then still remained extremely high: its top 1 per cent income share was 19 per cent and the corresponding number for the top 10 per cent was 44 per cent, which is higher than those of the US and substantially even higher by inequality than those of China until post-2012 :
Notes: Distribution of pretax national income (before all taxes and transfers, except pensions and unemployment insurance) among adults. Equal-split-adults series (income of married couples divided by two).). Imputed rent is included in pre-tax fiscal income and pre-tax national income series; source: Khalid 2019
It is during this period where the share of the wealth is acutely benefitting the high-income group of capital-endowed class :
The undeniable fact as to why many bumiputera had not attained parity despite +60 years of neo-liberal-enforced economic development is the existence of a new class of compradore capitalist. 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.
Malaysia’s 50 Richest 2020: Forbes. With globalisation, rentier capitalism attaches to the neo-imperial monopoly capitalism and its link to the global commodity chain dimension because of the multiple roles of rent intermediaries between capital and its accumulation; immediate consequence is accentuating wealth disparity with the working class.
As the household income has since raised Malaysia’s average poverty line income (PLI) to RM2,208 from RM980 in 2016, this means that the new metric brings Malaysia’s absolute poverty rate to 5.6% in 2019. This means that almost 6 out of 100 households in Malaysia could not afford to meet basic needs like food, shelter and clothing.
In 2019, the high-income T20 household would have earned 10 times more than the low-income household. In 2020, the high-income household still earns 6.7 times the low-income household. Though the Gini coefficient relative gap has narrowed, the absolute Gini coefficient gap has increased (as an instance, the earnings difference of T20 was RM$9,000 in 2019, but it was at a very high figure of RM$17,000 by 2020). Therefore; there is no equality improvement, but extremely widen inequality cutting across racial groupings :
Students in public higher education institutions in Malaysia 2012-2019, by gender are that in 2019, around 291.53 thousand male students and 415.02 thousand female students were enrolled in public higher institutions. The country had 20 public universities, 53 private universities and six foreign university branch campuses; and 403 active private colleges of various categories.
Yet the graduates unemployment rate is high despite all the education’s public and private infrastructure and corporate capitalism investment.
The primary and secondary school enrollment was reported at 43 % in 2019, according to the World Bank collection of development indicators, compiled from officially recognized sources. This is well below even the middle-income developing states.
Malaysia spends a large share of the national budget on education, yet learning outcomes have consistently fallen below expectations according to a recent World Bank Report which is often well articulated at various times by many rakyat2 like the question of
i) Not surprisingly, literacy rates are high in Peninsular Malaysia, at 95%, but it has to be noted significantly lower in Sabah and Sarawak, at 79% and 72% respectively, because their communities are poor, inaccessible, less educated and probably have lower expectations of their children. Irresponsible teachers take advantage of this by reporting for work but not attending classes, and falsifying records.
“Imagine a student walking an hour and a half to school, where there is no path or public transport, only to find no teacher when he arrives. Who is to blame? What can parents do if they are not literate and cannot afford to find out whether the teacher had to attend to regular, non-classroom administrative duties or was simply negligent, backed by a local politician who helped appoint the teacher in the first place?” UnescoGlobal Economic Monitoring Report 2017/2018 (GEM)
ii) The unfairness and inequality perpetuated by succeeding ethnocapital ruling regimes had only reinforced a phenomenon where the good – and well-to-do – students have exercised the exit policy and opted for the private sector where it is more lucratively beneficial to corporate capital. We are witnessing capitalism intensity with corporate capital investing in what were once regarded belonging to the public sectors ( whether it is in the pharmaceutical industry or the telecommunications sector ), and the resultant outcome is the mushrooming of international and private schools and tuition centres, and home-schooling becoming an alternative and popular learning choice to public educational institutions; we are having more private (corporate capital funded) universities than public institutions.
“If the situation worsens, there will be little left of national schools.”
iii) Politically, teachers are a sizeable vote bank, and politicians are quick to defend them no matter the situation, but we know that bad teachers are the weak link in the education system. We have heard this many times before: we may have picture-perfect policies but implementation is imperfect.
Datin Noor Azimah Abdul Rahim, chairman of Parent Action Group for Education Malaysia (PAGE) had expressed that according to the recently released UnescoGlobal Economic Monitoring Report 2017/2018 (GEM), “a review of teachers, school administrators, parents and officials in 24 countries found that 54% believed the code of ethics had a significant impact on reducing misconduct. Therefore, the teacher code of ethics shall be the guiding light“; but, unfortunately – and inevitably – oligarchy regimes are more interested in illicit capital and illegal tradings than management on the economic imperatives and rakyat2 welfare.
4] INADEQUATE SOCIAL SAFETY NETS
At about 0.7% of gross development product (GDP), Malaysia’s spending on social safety nets is much lower than almost all countries that have graduated to high-income status since 2000, which generally spend about 1.5–3.4% of GDP.
According to Ken Simler, Senior Economist, Poverty and Equity of World Bank Group, Shakira Teh Sharifudin, Senior Economist, Macroeconomics, Trade and Investments, World Bank Group and Zainab Ali, Research Analyst (Poverty and Equity) at World Bank Group: in the Aiming High: Navigating the Next Stage of Malaysia’s Development report, the national’s large commitments to operating expenditures such as salaries, pensions, and debt service payments have put continuous constrains on its ability to allocate more for social spending, as well as projected spending on long-term economic development.
The country, nearly everyone at the bottom 20% (B20) income group receives some form of social assistance, but they enjoy only 29.5% of the total program benefits. In contrast, a large share of social transfers ends up in the M40 (37.2%) and the T20 (9.5%) households.
Indeed, since 2012, Malaysia’s revenue collection as a percentage of GDP has been on a persistent decline, and this has negated a national’s ability to provide the high-quality public services and social safety nets that the expanding middle-class increasingly expects.
In 2019, Malaysia’s revenue collection stood at 17.4% of GDP. The country’s operational expenditure constitutes 80% of budget allocation is definite exceedingly far below her investments expenditure. As a dire consequence, the revenue collection is regarded as well below the average figure for upper-middle-income countries (28%) and high-income countries (36%). The nation severely under-collects in key revenue areas such as personal income and consumption taxes, in part from an expansive system of tax deductions and exemptionsacross all income levels rather than selectively be towards the T20 class.
Not only that, with the exception of the real property gains tax, the nation has minimal tax capital gains and there is no wealth tax in place: thus, reinforcing our argument that the corporate capital stronghold within a clientel capitalism environment is where the ruling class set to enjoy its wealth substantially, and indefinitely.
Then again, responding to the World Bank 2020 World Values Survey on whether it is an “essential characteristic of a democracy that governments tax the rich and subsidize the poor”, unlike in many other countries, most Malaysians had an indifferent view. It seems that the strife towards class discrimination has yet to attach traction. Without strong political intervention, and a teach-in initiative to be followed by appropriate and adequate processes in dismantling the kleptocrates’ capital superstructure, the clientel class of bourgeoisie leeches shall remain to suck rakyat2 labouring effort dried through surplus value expropriation.:
The twenty-first century rentiers are everywhere, scooping returns accruing from natural resources, investments, from land, from housing, monopolistic utilities, consumer credit, long-term contracts and infrastructural platforms’ data. The core feature of rentier capitalism is the resurgent capitalistic power that spans cultivated resources, fossil fuels, mined resources, finance, housing and the public sector out-sourcing rackets which generated surplus values that are being expropriated.
Rentier capitalism needs also be understood as part of political clientelism where over time, “citizens came to expect and rely on patron-client relationships, nested within party machines, albeit reinforced by carefully structured distributive and development policies”, (Meredith L. Weiss, The Roots of Resilience: Party Machines and Grassroots Politics in Southeast Asia, Cornell University Press and the National University of Singapore Press, 2020, p.76), where clientelism is the feature of Malaysian politics, fostered forcefully by the BN and UMNO ruling elites, whence even opposition parties had began to replicate that behaviour, too.
By delving into a class analysis of clientel capitalism, we shall discover that the power or dominance relations among persons, their subsumed class to entitled positions is where political power defines economic dominance and social status deference.
We shall define the concept of class “places” as distinguished from class positions where “places” exist at each of the these levels of society: economic, political, and ideological (or cultural) levels where at the latter, social dominance regards bumiputeras status and on an islamic allegiance, for instance.
By ethnocapital we mean a (malay) bumiputra owned and controlled an entity performing under a rentier or clientel capitalism approach whether it is a public agency, a government-linked company (GLC) or a privatised and or commercial enterprise.
Between the dominating and the dominated, under capitalism the bourgeois are really dominant at each level whereas the proletariats dominated at each.
The clientel capital [place] had aligned with economic oligarchs [positions] 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 [place] the party patronage [position] 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 as clearly expounded in a LSE.blog by Khalid.
The outcome of rentier capitalism is swelling of economic inequality and deeper socio-economic injustice in the country thus widening the class struggle within.
The Political Economy of Malaysia– a brief survey on the development of underdevelopment, economic stagnation and socio-economic inequality under Neo-Imperialism regime with neoliberal policies – is presented HERE.
Tech companies are the new empires of today: Alphabet revenue surpassed Hungary’s GDP, Facebook employs over 15000 content moderators around the world, and Microsoft has built data centers in nearly every corner of our planet, with Google global dominating the infrastructural platform corporate businesses.
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 
Towards The Malaysia Narrative 
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