PM Najib using peashooter measures which are not sufficient to boost Malaysian economy

by Dr Chen Man Hin

The chief reason why PM Najib reform proposals are weak and timid is because he is unsure of getting full support from Umno. This was admitted as much when the PM speaking to Umno leaders recently called on them to change and accept liberalisation and reforms to win the support of the people.

The bulk of Umno is resistant to reforms and this was quite evident at the Umno general assembly last month, when the assemby ignored appeals to change and reform by PM Najib and ex PM Abdullah. The assembly was more interested in the debate on money politics. To have reforms meant they would have to give up cronyism and the wealth from government contracts.

Tunku Aziz, former world Transparency International leader said as much when he observed that Umno was still mired in corruption and cronyism and without their support, the vision of PM Najib’s 1Malaysia was ‘a cruel joke’ – a pipe dream of the Prime Minister, and not shared by Umno.


Today’s headlines highlighted PM Najib liberalisation of equity to allow 70% foreign equity in insurance and investment banking as THE NEW DEAL.

Liberalisation of capital finance in the economy should not be confined to one sector only of Insurance and Investment Banks. CAPITAL FINANCE many other sectors like corporations and the KL Bursa of listed companies.

Sectors of finance should be liberalised and both foreign and local investors should be involved.

What about the stock exchange structure? The Malaysian bourse should be open to both local and foreign investors without the imposition of the NEP requirement of 30% equity for bumiputras. To liberalise you need to expunge conditions which drive investors away.

The stock markets of Hong Kong, Singapore and Tokyo do not have the NEP to restrict listed companies. This is a major reason why the KL Bourse is so archaic and listless compared to the high flyers of Hong Kong, Tokyo and Singapore which foreign investors strongly seek a listing for their corporations.

Open up more banks instead of only room for 5 new commercial banks. Let more licences be given to boost the banking sector, as in more enlighted countries like the States, UK and the European Union.

Mr PM Najib, the journey of liberaisation and modernisation is demanding. Be dynamic and progressive, and use more effective instruments to modernise, instead of a peashooter if you really intend to promote progress and prosperity.

  1. #1 by nkeng11 on Tuesday, 28 April 2009 - 5:11 pm

    What can you expect from a PM and Finance Minister who is not just incompetent but ignorant as well?

    Malaysia I guess would regress and be behind Vietnam, Thailand, Phillipines within next 3-5 years. In fact I forsee Malaysians going to work in Abu Dhabi as maids for the Arabs.

    UMNO politics is about money and croynism. Without this there is no UMNO!

  2. #2 by boh-liao on Tuesday, 28 April 2009 - 5:26 pm

    Someone asked in Malaysiakini: ‘Does Bangsa Malaysia include Indians?’
    Certainly a big yes.
    Learn from MMK.
    Reinvent and transform oneself from I to M and hey, presto, not only one becomes Bangsa Malaysia but Bangsa M without sia. Enjoy! I want, I want, 1Malaysia.

  3. #3 by TheWrathOfGrapes on Tuesday, 28 April 2009 - 5:31 pm

    This is laughable and making a virtue out of necessity.
    Read the 70% liberalisation in the insurance and investment banking sector as these two sectors needing the most infusion of foreign money. Yang lain still at 30%.

  4. #4 by rubini on Tuesday, 28 April 2009 - 5:36 pm

    The main reason the 70% for insurance and merchant banks is that foreign investor will want to shape the management of the banks. The 30% cap on local banks clearly shows that most UMNO cronies has loans with local banks without sufficient collateral.

  5. #5 by Godfather on Tuesday, 28 April 2009 - 6:21 pm

    Yeah, let’s bring back the crooked bridge, change the Penang bridge to an undersea tunnel, let’s revisit the bridge between Riau and Melaka, let’s accelerate the Bakun undersea cable. Never mind Bakun can only produce 2,400MW let’s oversize the cable to deliver 5 times this amount.

    Back to the crooked bridge, let’s make it even more crooked by lengthening the spans, double the travelling distance and tripling the costs. Now the design looks more like a toilet seat, so let’s call it a toilet seat bridge.

    Peashooting you say, Dr Chen ?

  6. #6 by frankyapp on Tuesday, 28 April 2009 - 6:45 pm

    Malaysia,dear Malaysia,for more than five decades,under the RAHMAN system,you still have not changed. The last man standing is NR. What can you expect from him after half a century or more years have gone by your rakyat have suffered in woe and grief without any sign of relief. Nothing,nothing my dear Malaysia,the system is the same. Malaysia dear old Malaysia,you will not change under this lone man still standing.Change will only come to you dear Malaysia when you get rid of this lone man standing.

  7. #7 by Loh on Tuesday, 28 April 2009 - 6:53 pm

    Dr. Mahathir Mohamad
    on April 28, 2009 9:59 AM | Permalink | Comments (0) | TrackBacks (0)
    (This is the third instalment in a series on the trends that led to the present financial crisis)
    ///1. Currency trading is another non-real contributor to the wealth of the rich countries. The trading again involves non-existent money. Banks would lend as much as 30 times the amount of investors’ money held by the traders. The loan is again made up of bank created money. So also would be the investors’ money if they borrowed from the banks.///—TDM
    Banks are able to lend more than the demand deposits placed with the bank by the clients because the loans taken out are partly kept in a bank, and part of such ‘redeposit’ can again be given out as loans, ad infinite. The fraction of the deposit that is kept from giving out as loan may be termed as ratio of reserve. For a reserve ratio of 10%, the maximum amount of total loans, giving to different borrowers could reach 10 times. To loan out 30 times the amount of ‘investors’ money held by the traders’, the reserve ratio should be only at 3.3%. Banks do not lend to borrowers without collateral. How traders could satisfy the bank to lend them the amount of money to undertake currency trading is a question which requires plausible answer. Banks operate under banking Act, and it is unlikely that banks would undertake currency trading on all the deposits placed by their clients. Banks are required to facilitate currency flow of both financial and real economic sectors too.
    The money banks loan out beyond the original deposit is here termed created money. But when the ‘created money’ are not returned by borrowers, the money becomes as real as if it was borrowed from a third party. Banks cannot create money for fun.

    ///2. The huge borrowings by the currency traders enable them to manipulate the market; pushing the value of the currency up or down. When the value of the currency changes the traders make a profit. Since the currency traders control trillions of dollars, their profits would be huge, and so would the dividends paid to the investors.///–TDM
    In the 1990s Malaysia used its vast amount of foreign currency reserve to speculate on pound sterling. George Soros was Malaysia’s counterpart then betting for pound’s devaluation, and he walked away with more than one billion pound in profit. If TDM is right on his statement, then George Soros is financially more powerful than Malaysia. Alternately, George Soros is smarter than the whole of Malaysian team involved in currency speculation. I surmise that because Malaysian government was used to legislate out of trouble that it was not able to act wisely in the real world and ended up going against the currency trend. It was stated by the government then as a paper loss. I would say that on the paper all digits 1 to 10 have equal weight, and it was not a big deal.

    ///3. The trade in currency is estimated to be 20 times bigger than total world trade. The earnings per dollar invested would be higher than the dividends from production and trading in goods and provision of services. The investors and traders would therefore earn far more than what they would expect if they were to invest only the money they really have.///–TDM
    Currency trading is no different from trading commodities futures. That allows traders and manufacturers to concentrate on their business and pay a sum to hedge their loss against changes in currency value or price level of traded commodities. Like gamblers in casinos, not all players win, and currency traders do risk their investments. During the 1997 financial crisis George Soros ended up losing around billion HK$ betting on HK currency and the stock market. Many people invest in stock market, and those who took huge loans from the banks gained more than those who invested with their own money, but others taking out huge loans end up in bankruptcy.
    ///4. Individuals cannot borrow 30 times more than the money they have in order to invest. But currency traders can. Hence the investors’ preference to invest with the currency traders.///–TDM
    There is no sure way of making profit from investment, financial or otherwise. The high gearing companies in real sectors might not make more money than those who are not. There is no simple formula to become rich.

    ///5. The trade in currency is not in order to finance business or trade. It is for gambling on the appreciation or depression of the particular currency. Either way the bettor (trader) would make a profit. Since the profit is from 30 times more than the investors’ money, both the traders and the investors would make far more than if they trade in the real amount invested./// –TDM
    It is true that whether currency value moves up or down, and there are people who make money on movement either way; but they are not the same people who make money either way. It is true also that people lose money either way it they bet against the trend.

    ///6. The profits earned by the traders and the investors would one way or another go into the calculation of the GDP and per capita income of the country. ///–TDM
    If the gains of all gamblers are included in the GDP computation, then countries with a lot of casinos will have high GDP per capita. Perhaps the people involved in national accounts computation should enlighten us on this technical issue.

  8. #8 by dawsheng on Tuesday, 28 April 2009 - 8:51 pm

    Whatever happened to Abdullah’s corridor?

  9. #9 by zak_hammaad on Tuesday, 28 April 2009 - 9:45 pm

    Pakatan hardly has any experienced of competent economists or indeed qualified hard hitting fiscal policy makers to be judging BN on the measures they have implemented and are acontinuing to draw up. I think its a case of sour grapes with Pakatan :^)

  10. #10 by katdog on Tuesday, 28 April 2009 - 10:32 pm

    More banks? Are you crazy? Malaysia’s banking system is already sliding. Some international banks are already considering to shutdown their operations here. Others are consolidating their operations and closing down excess branches.

    What is more banks going to do for us at this time? Instead of offering more banks to come in, the current international banks already here should be given more licenses to expand their operations and open up more branches.

  11. #11 by TheWrathOfGrapes on Tuesday, 28 April 2009 - 11:07 pm

    Loh, I am surprised that you took the trouble to correct that economically-challenged TDM. This was the guy who planned for around 8% GDP growth per year till the year 2020 (to achieve developed status) AND at the same time, maintained ZERO inflation. Talking about eating the cake and still having the cake and keeping more than 30% of it.

  12. #12 by HJ Angus on Tuesday, 28 April 2009 - 11:13 pm

    Also don’t forget that Bank Negara was a major currency speculator untill they lost their pants against George Soros and they wanted to corner the London Metal Exchange.

    US capitalists play with banks’ money sometimes with proper approvals but Malaysia played with our foreign reserves and the whole story has still not been told.

  13. #13 by monsterball on Wednesday, 29 April 2009 - 12:48 am

    All I know…under Mahathir….RM1000 and RM500 notes were legal tenders.
    Millions were carried out in suit cases by UMNO crooks…as depositing into banks..too much evidences. Go imagine how much carried out in 22 years. Now you know why he was so popular with UMNO.
    Not only have great idea to protect crooks…but one more to put Anwar into 6 years jail..with false charges.
    Nice to note ad read Dr.Chan Man Hin is active in DAP again.

  14. #14 by passerby on Wednesday, 29 April 2009 - 1:11 am

    If it is not for the non-real economy activities, mamakthir’s family will not be a billionaire. Can you imagine how small the world economy will be if it is just restricted to the direct economy, half of all malaysian will be living in poverty. This kind of non-real activities are there to make the economy more efficient and it is up to the government to direct and control any excesses and not be one of the speculators.

    All these talks of islamic banking and financing and economic method is all just bullshit. If these morons don’t understand the concept of interest, how do you expect them to run the country. Money is also a commodity after you have sell your coconut and you you are not going to give or loan it to people for free. If these morons think that the barter system of 1,400 years ago is a better system, the malaysian economy will be a fraction of to-day.

  15. #15 by chengho on Wednesday, 29 April 2009 - 5:38 am

    Nice try DR Chan , Tunku Aziz still popular than u , why so many over 70 in DAP , reform ..reform…

  16. #16 by TomThumb on Wednesday, 29 April 2009 - 6:09 am

    The 30% is reserved for cronies

  17. #17 by Godfather on Wednesday, 29 April 2009 - 7:42 am

    “Pakatan hardly has any experienced of competent economists or indeed qualified hard hitting fiscal policy makers…”
    Zak Hammaad the foreigner

    Indeed BN has a number of experienced competent economists, led by non other than Zak Hammaad’s hero the Mamakthir. In fact, BN will be bringing back hard hitting monetary experts like Diam Diam Daim so that more loot can be channeled into UMNOputra hands.

  18. #18 by taiking on Wednesday, 29 April 2009 - 9:55 am

    70% for foreigner. The balance 30% will be subject to the unwritten rule: i.e. for umnoputras only. Yeah. So what about the rest of us non-umnoputras?

  19. #19 by imranj78 on Wednesday, 29 April 2009 - 10:12 pm

    Small move or not, it cannot be ignored that Najib’s move is a good one and in the right direction. I agree that this alone will not suffice and that more improvements should be seen. I disagree with Dr Chen in one thing – I do not agree tat Najib was trying to make the Umno guys happy. Rather he is trying to introduce a change gradually. Like it or not, the concept of allocating % by race in this country has gone on for more then 20 years. It cannot and should not be removed in one single swipe as this will naturally result in a big resistance from many especially those who `seem’ to be in the loosing end.

  20. #20 by ktteokt on Thursday, 30 April 2009 - 9:34 am

    Maybe he should have used C4 measures, sure to cause a “BLOW”!

  21. #21 by One4All4One on Friday, 1 May 2009 - 7:40 pm






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