Najib Stalls on his New Economic Policy

Asia Sentinel
Fleshing it out is probably impossible

As expected, Malaysian Prime Minister Najib Tun Razak unveiled his New Economic Model in an 8,000 word speech on March 30 to a national investor conference in Kuala Lumpur. And, as expected, despite the hype and favorable news stories in the international press, it contained virtually nothing of substance. The speech can be found here.

Najib remains caught between the need to eliminate costly subsidies enshrined in 40 years of economic policy that benefit ethnic Malays and the fact that eliminating them would alienate a major part of his United Malays Political Organization political base.

His pledge in the speech to eliminate rent-seeking is fraught with political danger, since UMNO has largely been built on party cadres who have made fortunes on government contracts or other arrangements. As Lim Kit Siang, the leader of the opposition Democratic Action Party, pointed out to Asia Sentinel, Najib’s promise to end rent-seeking was almost an exact echo of speeches by his predecessor, former Prime Minister Abdullah Ahmad Badawi, who was unable to make any progress whatsoever in the face of implacable opposition from UMNO cronies.

The premier has been trying to walk the line between economic liberalization and enraging his base virtually since he took office a year ago, offering to unveil policies and then delaying. The details now have been delayed until the release of the 10th Malaysia plan, probably in June. Some, including veteran UMNO politician-turned-reformer Tengku Razaleigh Hamzah, whose speech appeared on March 24 in Asia Sentinel, have questioned whether it is possible to split the difference.

Last year, Najib quickly stoked ethnic Malay anger by removing a long-standing requirement mandating ethnic Malay participation in 27 economic sub-sectors as well as removing a requirement that 30 percent of shares in IPOs go to ethnic Malays. That,along with rising irritation in other ethnic parties, led to rallies across the country put on by the Malay Consultative Council, an umbrella group of 50 ethnic Malay non-government organizations, and its most active voice, an NGO called Perkasa.

While there has been no open break between Najib and the splenetic former Prime Minister Mahathir Mohamad, Mahathir has appeared several times at rallies to defend so-called ketuanan Melayu, or Malay superiority. Some of the rallies have turned into near riots and have been likened to the Tea Party rallies in the United States that have roiled American politics. Mahathir is also close to Ibrahim Ali, a former UMNO wheel-horse who is a major force in Perkasa, leading some to believe Ibrahim is Mahathir’s spear-carrier.

As Asia Sentinel reported on March 8, the widening gap between what Najib wants to do and what a major portion of his United Malays National Organization constituency wants is putting in jeopardy his so-called RM20 million 1Malaysia campaign, designed to bring the country’s alienated and fractious ethnic groups together, and torebuild the Barisan Nasional, the ruling national coalition of ethnic political parties.

In his speech, Najib said the country could no longer rely on a few sectors like oil palm plantations and crude oil sales to drive growth. He called for the country to diversify and provide incentives in new strategic industries. The education system – which critics say now gives ethnic Malays virtually blanket passes with little academic rigor — must be revaluated and improved, he said, to reward excellence and nurture talented graduates who excel in strategic and creative thinking, and entrepreneurial and leadership skills that will drive success in the decades ahead.

On Tuesday, the Malaysian Insider, an increasingly influential website, reported that the Malay Consultative Council is split over Najib’s plans, with the council taking an unofficial stand to support them on condition that affirmative action features contained in the New Economic Policy, put in place after bloody ethnic riots in 1969, remain in place. Given that Najib’s economic plans would remove many of those perks, it remains to be seen how he can convince the rank and file of their value.

Najib does have an improving economy working in his behalf. As he told the Invest Malaysia conference Monday, fourth-quarter 2009 Gross domestic product grew by a higher-than-expected 4.5 percent, that exports have rebounded, and foreign direct investment is picking up. The Industrial Production Index, he said, rebounded to 12.7 percent growth in January with exports, which traditionally have comprised more than 100 percent of GDP, exports rose 37 percent to RM52 billion and imports increased by 31 percent to RM40 billion. His decision last year to inject RM67 billion of stimulus funding provided a much-needed boost to the economy.

The government, he said, “can no longer tolerate practices that support the behavior of rent-seeking and patronage, which have long tarnished the altruistic aims of the New Economic Policy. Inclusiveness, where all Malaysians contribute and benefit from economic growth – must be a fundamental element of any new economic approach.”

However, there is no better example of how closely tied to Najib’s own coat-tails are to rent-seekng than a contract to provide services and coordination for two Amaris submarines purchased for US$1 billion from DCNS, a French defense contractor, when Najib was defense minister. Najib and one of his closest friends, Abdul Razak Baginda, were intimately involved with the purchase of the submarines. Although many critics characterized the €114.96 million payment to a company called Perimekar, partly owned by Razak Baginda, as a bribe, Malaysia’s defense ministry defended it in Parliament as a support services contract.

Perimekar was partly owned by the Armed Forces Superannuation Fund Board (the military retirement fund), Boustead Holdings Bhd, and KS Ombak Laut Sdn Bhd. Ombak Laut was in turn owned by Razak Baginda, who was tried for the murder of Mongolian translator Altantuya Shaariibuu and found not guilty in a controversial trial that saw two of Najib’s own bodyguards convicted of the crime. Altantuya had served as a translator in France on part of the submarine transaction and was demanding US$500,000 from Razak, her former lover in what she herself called blackmail in a letter found after her death.

Yet there is another service contract as well. The submarines became controversial again in February when it was reported that the first one to be delivered had problems with its ballast system and couldn’t submerge. Although that turned out to be a relatively minor problem, it brought to light questions over an additional service agreement between the government and a well-connected firm called Boustead DCNS, a joint venture between BHIC Defence Technologies Sdn Bhd, a subsidiary of publicly-listed Boustead Heavy Industries Corp Bhd, and the France-based DCNS SA, which built the subs. Originally Boustead told the Malaysian Stock Exchange that the service contract was for RM600 million (US$184.1 million) for six years, or US$30.68 million annually. However, the contract later ballooned to RM270 million per year. Boustead Holdings is partly owned by the government and has close connections with UMNO.

There are dozens of such contracts or other arrangements between the government and favored companies closely connected to either UMNO or the Barisan Nasional as a whole. One of the costliest scandals in Malaysian history blew up last year when it transpired that a plan to modernize Port Klang, a seaport 60 km west of Kuala Lumpur, had gone so far out of control that the costs skyrocketed from RM1.96 billion to a potential RM12.45 billion if the government has to pay all interest costs it is obligated to by guarantees. Although the scandal is mainly centered in the Malaysian Chinese Association, the second ethnic party in the Barisan Nasional, or national ruling coalition, it also implicates several leading members of UMNO as well, and there appears little appetite to prosecute any of them despite Najib’s rhetoric.

“The government promised the world it would be announced by the end of last year,” Razaleigh wrote. “It was put off to the end of this month. Now we are told we will be getting just the first part of it, and that we will be getting merely a proposal for the New Economic Model from the National Economic Advisory Council. Clearly, politics has intruded. The NEM has been opposed by groups that are concerned that the NEM might replace the NEP. The New Economic Model might not turn out to be so new after all.”

  1. #1 by Bigjoe on Friday, 2 April 2010 - 7:08 am

    The stalling NEM is a minor problem for Najib right now. The day after he announced it his own deputy TROPEDOED it..He can’t do anything now. If he move forward, there will be problems and fights. His immediate problem is to deal with Muhiyiddin – everything else does not matter…

  2. #2 by pulau_sibu on Friday, 2 April 2010 - 7:13 am

    Stupid boleh mentality. The best SPM students should be trained first in the local universities until getting a bachelor’s degree, not to send them overseas right now.

    We have to prove that our boleh u can cultivate excellent students. Else what ranking of top 100 or top 200 are we talking about?

    At this moment, it proved that the politicians have no confidence in boleh u, such that the good ones have to be sent overseas (or else they will be buried alive in boleh u).

  3. #3 by k1980 on Friday, 2 April 2010 - 8:06 am

    A good way to improve the image of the police

  4. #4 by Godfather on Friday, 2 April 2010 - 8:19 am

    The New Economic Model is based on the Mongolian model. You claim that there is no corruption because the seller doesn’t pay any commission but then you as buyer pays a commission to your crony. As soon as your crony gets into trouble due to disputes in the sharing of the commission, you take care of the trouble with all the means at your disposal, including the use of C4.

    New Economic Model, expired Mongolian model.

  5. #5 by k1980 on Friday, 2 April 2010 - 8:24 am

    The New Custody Model, bolehland-style (No Mongolians involved here)

  6. #6 by Godfather on Friday, 2 April 2010 - 8:26 am

    For 30 years, they have been getting handouts, freebies, discounts on literally everything. Now you want to take these away and you expect them to be happy ?

    Ah, but the New Economic Model has a transformational fund to continue giving out the handouts and the freebies “for those who are affected” by the “transformation”. The fund will be extended perpetually – based on political considerations. So the message to UMNOputras is this: don’t worry, we will continue to take care of you.

  7. #7 by k1980 on Friday, 2 April 2010 - 8:43 am

    Razak Bagin should be allowed to keep his RM500 million commission for 5 hours only

  8. #8 by dagen on Friday, 2 April 2010 - 8:59 am

    NEM based on mongolian model, Godfather said.

    And yes it is. So do expect lots of perks and cracking good commissions upfront and back end. Umnoputras may as they have for the last 50yrs squeeze the model dry or bump it hard. But unlike its predecessor, the new model will now give the unprivileged lot like the rest of us lip service in generous quantity.

  9. #9 by pulau_sibu on Friday, 2 April 2010 - 9:12 am

    Jangan takut to admit that you follow the 1Israeli model, the Jewish model.

    The Koran and Bible both originated from Jewish belief, thus the 1Israeli belief, in the middle east.

    So it is fine to admit that we follow 1Israeli slogan

  10. #10 by Thor on Friday, 2 April 2010 - 9:35 am

    I do believed that in every speech that he made, he does not understand a single word of what he uttered.

  11. #11 by Jeffrey on Friday, 2 April 2010 - 9:43 am

    This Asia Sentinel’s article is pessimistic about Najib’s reforms (1 Malaysia/NEM). The words “Fleshing it out is probably impossible” say all. The delay in rolling out NEM, and now the tentative proposed implementation of it (in stages) are cited as evidence of the difficulties confronting the PM’s reforms.
    Most telling is ever since becoming premier, the main thrust to show what he could deliver is economic reforms. He drew lessons from predecessor’s fate. When Pak Lah prioritized political/institutional reforms (eg MACC Act, appointing Zaid as Law Minister to show contrition to judges sacked in 1988 besides Royal Commission on “looks like me, sounds like me but may be not me” videotape!), party warlords immediately coalesced and ushered him out of power mid-term.

    So probably to avert similar fate, the present premier touts the economic reforms via 1 Malaysia Government Transformation Programme (GTP) Roadmap and NEM. Hopefully, along the way political reforms necessitated by economic ones will also take place to placate rakyat clamouring for change.
    However it’s not also easy. This “camouflage” route will not render sanguine reactionaries against reforms/change. Already TDM, Perkasa and other NGOs advocating Malay Agenda immediately voice their insistence that his NEM does not deviate from NEP.

    The reality is that one cannot dodge the political issue – do we tell advocates of ‘Ketuanan’ that the time and idea has arrived for the country to free itself from the stranglehold of communal politics and racial policy???? That’s the political question! It’s more paramount that the economic one sought to be addressed by the NEM.

    Sure, our economy needs reforms. We’re caught in what Ku Li describes as the Middle Income Trap. Not only foreign portfolio and direct investments detour to neighbouring countries but our very own corporates re-locate their investments elsewhere. Even the world’s 33rd richest man, a Malaysian (HK based) Robert Kuok has already relocated his plantation conglomerate PBB Oil’s domicile to S’pore under Wilmar and is currently divesting his stake in general insurance business (Jerneh Insurance Bhd). Besides high net worth individuals taking their money out to hedge against risks, those have talents skills and brains are also getting out. In a way one can say these people are not confident that the situation will improve or the reforms will be effective. There could be a few reasons for this.

    First, it is trite that before economic reforms may be successfully implemented there must first or concurrent be political and institutional reform. It cannot be economic reform first then political along the way. For precepts underpinning economic reforms such as being market friendly, merit and need based, transparency and accountability can only flourish within a political foundation/framework that abjures money politics/corruption and race based policies.

    To try back door political and institutional reforms under the cover of bold economic reforms at the forefront is to put the proverbial cart before the horse. It is also to imply the forces resistant to change are too overwhelming to be confronted directly and headlong.

  12. #12 by dawsheng on Friday, 2 April 2010 - 9:45 am

    For any economic model to be successful BN has to get out of the way. Having said that doesn’t mean that PR will be successful in its economic agenda should they replaced BN as the government. Both political parties tend to rely heavily on FDI, no doubt it would help but only as a short term solution, the danger of flooding the country with foreign companies especially in the financial segment is far reaching.

    Number one priority for our economic model is to clear our external debts and reduce public debts, increase production of food and necessities and invest in renewable energy. Any other form of economic model will definitely failed.

  13. #13 by Jeffrey on Friday, 2 April 2010 - 9:47 am

    Which brings us next to the second problem – a dearth of strong leadership to act based on dictates of principles than mere power.

    Abraham Lincoln was a great leader because notwithstanding a large portion then of the population in the South that did not want to end racial discrimination and slavery of the Blacks, he made the courageous decision – do or die mission – of forcing the issue by going to civil war pitching Whites against Whites for the principle of defending the dignity and equality of the Blacks!

    The country has not so far produced such leaders here. The last strong one (TDM) advocated the other way – for racial/communal politics. At best what we have are leaders that prevaricate, try to reconcile the irreconcilable, juggle the middle between the incompatibles and deftly maneuver to a position appearing doing something whilst in fact doing nothing, just to stay in power! It then becomes very difficult!

    Then there is a third problem undermining the emergence of the kind of bold and great leadership referred to preceding parts – alluded to by Asia Sentinel’s article that mentioned the “two Amaris submarines purchased for US$1 billion from DCNS” and their nexus to “rent seeking”. In not so many words, Sentinel is asking, how could a leader put a stop to rent seeking amongst rent seekers when those whom he intend to stop could turn around and counter – “those who live in glass houses should not throw stones”?

    When a country faces an economic crisis – whether currency attacks by hedge funds or global maelstrom – what matters most (more than the dots, fine print and details of masterpieces of economic blue prints/plans) – is boldness and strength of political leadership to tackle political issues concomitant to economic ones, because the first is foundation of the second, and the second cannot take place unless the first is confronted and tackled headlong with determination and will. It requires a preparedness to lose all, including power if necessary, to make the change take place.

    That’s the crux of the dilemma – the risk of being ushered to political oblivion when detractors with vested interests get the better of the leader OR the leader otherwise succeeds in his trajectory to greatness and ensures a place in the annals of history of the nation!

    Right now what the country needs, if it were to rise above its travails, is bold and strong leadership based on principles.

    Instead we have three problems of leadership as outlined. Can these problems be resolved so that decaying Institutions may be revitalized, Wealth be sustained/grown and Talent be returned?

    The trend of capital and talent leaving the country un-reversed suggests that there is little optimism that there is such leadership now or foreseeable future to help this nation break the stranglehold of communal politics and racial policy to pave the way for revitalization and vibrancy of the economy driven by ideas and skills.

  14. #14 by Jeffrey on Friday, 2 April 2010 - 10:01 am

    I forgot to say a little bit more of the first problem of leadership. Najib has admitted with candour to investment and fund managers in HK – there are too many invested interests defend in the current political system and NEP.

    The first problem is by constitution the PM’s position is directly derived from support and votes of party delegates, power brokers and their backers – and not from the electorate at large as the US’s system.

    Unfortunately too its in the DNA of politicians to prioritize keeping their exalted position of power than to risk it.

    So even if people/electorate want change, there is no political will to antagonize party delegates and power brokers resisting it by reason of vested interests in existing political system.

  15. #15 by dawsheng on Friday, 2 April 2010 - 10:12 am

    Najib NEM’s is based on injecting more money supply into the market. Everyone will have enough money in their pockets but what they can buy with ringgit is another matter altogether. I hope Malaysians use their brains to think.

  16. #16 by son of perpaduan on Friday, 2 April 2010 - 11:19 am

    Good luck all malaysian pay this and pay that non stop paying till your next generation perpetually suffering from Umno rule. Ringgit is worthless, income unable to sustain our daily meets. Educations quality failed to bring up our children competition with the rest of neighbouring country and the world too.

  17. #17 by Jeffrey on Friday, 2 April 2010 - 11:49 am

    In respect of the argument in #11 – that political/institutional reforms should come first if not concurrent to provide the foundation for economic reforms before they may be successfully implemented – I am aware that there is another counter-argument that says PM is doing right thing to use the indirect purportedly market friendly, merit and need based approach of NEM to reverse the prevailing mindset based on race, Ketuanan and subsidies.

    The counterargument says that when trying to change mindset nurtured through 22 years of TDM’s rule, it cannot utopian fashion be radically changed over-night as it is politically unacceptable and will shock and provoke an inmediate backlash from those with vested interests.

    The counterargument further stresses that political reforms by a leader in these respects to change generational mindset from communal/racial to a more inclusive, less racial approach appreciating competition/merits, these reforms have to introduced slowly and piecemeal (and cannot be drastically foisted upon) and hence an indirect way of doing so via economic reforms is the method most promising of better results.

  18. #18 by sotong on Friday, 2 April 2010 - 12:04 pm

    After decades of bad leadership and gross mismanagement and being left behind by other countries in the region…our ” leaders ” are still lost at what is best for the country and her ordinary people??

  19. #19 by johnnypok on Friday, 2 April 2010 - 12:55 pm

    So long as BN/UMNO is in power, there is no hope. Sabah and Sarawak must pull out as soon as possible. The situation is getting more and more complicated and messy. We are more divided than ever before. A big-scale civil war cannot be avoided.
    “Malaysia Tak Boleh Lah”

  20. #20 by frankyapp on Friday, 2 April 2010 - 1:12 pm

    Look guys,the NEP had failed,# one reason was CORRUPTION. Umno/Bn got rid of NEP,replaced it with NEM but not CORRUPTION. It’s like putting the cart in front of the horse.It will never work. NEP not only failed the majority of the ordinary malays ,it also failed the whole country economy and political system. Look again,Umno failed,hence Umno Baru but,it’s failing miserably too,because of corruption.NR can change shirt from single-breated suit to double-breated suit but still bring forth corruption with him,nothing evil will change.

  21. #21 by wanderer on Friday, 2 April 2010 - 1:29 pm

    MANA ADA Baru Economic Policy, all copied materials or imported from Israel!!!

    Do we expect UMNO-BN fleabrains to have the vision for a better Malaysia. Sound financial ideas that can embarrass our neighbour with a stable economy and a financial power house of this region??
    Doubt it…bohon kaka tua ar!

  22. #22 by johnnypok on Friday, 2 April 2010 - 2:11 pm

    Whatever concept is not good, and will not work. God create human to work for the money. That is why Bodohlanders become more bodoh and more lazy, and forever beg for more money, until in the end they become completely useless, without legs and no brain.

  23. #23 by boh-liao on Friday, 2 April 2010 - 2:58 pm

    NR wants 2 end rent-seeking, actually easy saja, just let PR run d federal gomen n let PR go after d corrupt rent seekers, including MMK n his sons n cronies, n AAB’s SIL
    If not, all voters must vote BN out n go after d corrupt BN kaki

  24. #24 by monsterball on Friday, 2 April 2010 - 3:43 pm

    If you treat all their actions…speeches to wish votes from one race..then from others….then you will understand….what UMNO BARU is.
    Best of all ….telling Malaysians to give them a chance to prove their worth.
    After 54 years….want another chance?
    What kind of idiots are these buggers?
    They talk and do like so….AFTER 12the GE….loosing out 4 States.
    Can you imagine when the ride high and mighty…what happened?
    All got fat and filthy rich….taking EPF…and Petronas money to do as they like…to enriched themselves..and cronies…so call the billions…while few thousands RM thrown here and there to thousands of Muslims….who are caught in the net.
    I feel sorry for members in MCA..MIC and Gerakan…that cannot see that too……being programmed to live in peace and harmony.
    Quite natural…most are poor and do not pay any taxes…and so do not understand how UMNO BARU steal from the country.
    But those MCA MIC and Gerakan leaders and Presidents know that too well…..yet choose to carry UMNO BARU balls…why?

  25. #25 by johnnypok on Saturday, 3 April 2010 - 2:36 am

    If you are not happy, just get the hell out of here. This land is my land, and I do what I want with my land. No need to teach others what to do. If you are clever and smart enough, you would not be blogging here. Sorry, I am a moster. Please forgive me.

  26. #26 by monsterball on Saturday, 3 April 2010 - 10:07 am

    hahahahahaha …..Johnnypok reminds me of a young baffalo who does not know ..what a tiger is….or he is a tiger who does not know what a lion is.
    He is always not happy and encourage separations…now talk cock and bull.
    I think his brain is one screw loose.

  27. #27 by monsterball on Saturday, 3 April 2010 - 10:08 am

    hahahahahaha …..Johnnypok reminds me of a young baffalo who does not know ..what a tiger is….or he is a tiger who does not know what a lion is.
    He is always not happy and encourage separations…now talk cock and bull.
    I think his brain is unreliable.

  28. #28 by monsterball on Saturday, 3 April 2010 - 10:13 am

    Sooooo all blogging here are stupid like you…johnnypok?
    What logic is that?
    Glad you say sorry too.
    What is a moster?…gangster?
    I have seen alot of those kucin kurap balless cowards too..unless you are a Tai Kor.

  29. #29 by monsterball on Saturday, 3 April 2010 - 12:11 pm

    hahahahahaha…Johnnypok encourage Sabah and Sarawak to be separated from West Malaysia….and now ask others to get lost from this blog…as he aim to stay put as a Malaysian.
    I tell you…this wonderful confused man will vote change of government…but will also chase others away…if ever do not agree with his nonsense.
    Real moster ….or mobster…he meant?……..hahahahahaha
    Come on johnnypok….clear your mind and be steady…for some of your comments are teaching disunity..which I will go after you….if you continue.

  30. #30 by johnnypok on Saturday, 3 April 2010 - 3:30 pm

    Unless the new economic policy is favorable to Sabah and Sarawak, it is a matter of time before the wind of change blows BN/UMNO into oblivion.
    All the recent developments and happenings are not helping BN/UMNO to improve the confidence of voters.
    PR is definitely gaining ground, especially in Sabah and Sarawak. DAP is doing very well with their on-going campaign, and I pray for the party to be blessed by God and to achieve great success in the coming GE13.
    I also pray for Anwar to gain even more popularity and to have even more wisdom, and to become the next PM of Malaysia.

  31. #31 by johnnypok on Tuesday, 6 April 2010 - 6:04 am

    Thank you Mr. Monsterball for pointing out my poor standard of writing, and my low mentality. I apologise and beg you to forgive me for hurting your ears and your sensitive mind. Are you an old man?

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