I don’t know if Umno is capable of reforming itself, says Ku Li

The Malaysian Insider
12 December 2014

Tan Sri Tengku Razaleigh Hamzah, Malaysia’s longest-serving Member of Parliament, is decidedly despondent about his country.

“I cannot recall an experience when Malaysia, after independence, was trapped in a situation similar to that we face now,” he said in a wide-ranging interview with The Edge Review.

Malaysia’s troubled political landscape, where the sensitive issues of race and religion are dominating headlines and public discourse, is being weighed down by the serious deterioration in the country’s economic performance where mounting debt in the public sector and households is leaving the country very vulnerable to external shocks.

“We have never been in this spot before,” says the urbane 77-year-old politician, who is fondly known as Ku Li.

Tengku Razaleigh, a prince from the northeastern Kelantan state, ought to know.

Since the mid-1960s, Tengku Razaleigh has played key roles in several of the country’s ambitious economic initiatives and held crucial ministerial positions to emerge as a strong contender for the premiership of Malaysia.

In 1965, he became the first executive director of state-owned Bank Bumiputra, which today, after several transformations, is the regional financial powerhouse CIMB Group.

In 1974, he was appointed as the chairman and chief executive of the newly minted national oil corporation Petroliam Nasional Bhd, or Petronas, a position that the premier at the time, Tun Abdul Razak Hussein, described as “equivalent of a Cabinet Minister”.

During this meteoric rise, Tengku Razaleigh was also making waves in the United Malays National Organisation (Umno) party that dominates the ruling National Front (Barisan Nasional) coalition government.

In 1971, he was elected to the powerful policy-making Umno Supreme Council and, two years later, to the prestigious position of party treasurer.

Cabinet appointments followed quickly. He was Finance Minister between 1976 and 1984, and Minister of International Trade and Industry from 1984 to 1987.

His departure from the government followed a bruising battle for the Umno presidency, and the Malaysian premiership that traditionally comes with it, with Tun (at the time Datuk Seri) Dr Mahathir Mohamad.

Tengku Razaleigh narrowly lost and was dropped from government, together with his supporters.

Since then, he has been sidelined from mainstream politics within Umno and the government. But for many Malaysians, he remains a voice of reason.

Here are excepts from the recent interview:

Q: Public discourse on politics has turned decidedly shrill and the prospects of the economy are turning more bearish. As one of the country’s most senior politicians and its longest-serving Member of Parliament, can you recall the last time Malaysia was trapped in such hostile territory? Or are we in a crisis not seen before?

Tengku Razaleigh: I cannot recall an experience when Malaysia, after independence, was trapped in a situation similar to that we face now. Maybe you could draw some parallel with the nightmarish experience of the May 13 riots although it is not exactly what we have today.

Before independence, there was Hartal in 1948 and 1962 when it was difficult to get the basic necessities, particularly food, because shops were closed.

Then there was the experience of the Communist Emergency between 1948 and 1960, and the Confrontation in 1963.

In terms of the economy, we weathered the four past recessions quite successfully, beginning with the 1974 inflationary threat followed by the commodity recession of 1985, the 1997-78 Asian financial crisis and the 2008 recession caused by the subprime debacle in the US and sovereign debt problem in the Eurozone.

Each time we made a rapid recovery through both pragmatic policy adjustments and some fortuitous circumstances. Things are not so accommodative right now. I am concerned about the continued rising cost of living, falling oil and commodity prices, high government and household debt levels, which leave the government with little room to manoeuvre and the middle class, pensioners and the poor exposed and highly vulnerable to economic emergencies.

Some of these economic problems and difficulties have tended to have racial overtones. On top of that, structural issues persist, such as federal-state relations, especially the opposition states, and with Sabah and Sarawak, and of course corruption. Some people have described the situation as like moving towards a perfect storm, God forbid.

Q: The list of our political woes grows by the day. What do you think needs to be tackled urgently?

TR: People’s welfare comes first. The basic necessities, at reasonable price, should be readily available. The government and its agencies, with the help of NGOs, must monitor the prices of goods and services.

This must be conducted with great tact. As I said in my letter to MPs on the 2015 Budget, tackling the rising cost of living is the highest priority.

No question about it; the ordinary folks are going to be hit the hardest in the event of a sudden downturn, with the falling ringgit, the higher cost of government borrowing to continue to support BR1M (government cash aid), and the subsequent inflation making worse the already rising cost of living. Poor homeless people in the Kuala Lumpur city centre patronising the soup kitchens in large numbers is highly disturbing.

The Anti-Corruption Commission must go into full swing to minimise corruption in both the public and private sectors. Those who held or hold executive positions must, together with their nominees or trustees, make available declarations of their assets and liabilities.

If the information given does not tally or evidence shows that they could not provide satisfactory answers to queries, then all their accounts should be frozen. Upon conviction, depending on the severity of the case, they should be imprisoned for life.

There shouldn’t be any more lip service on the matter of corruption.

All enforcement agencies should be policed to weed out the bad from the good if they are to regain the trust of the public. All are equal under the law and subject to the same rules.

The question of security is uppermost in the minds of the people. They want to know that they and their families are safe wherever they are.

The question of sovereignty is a very important one. God alone knows how many non-citizens carry blue identity cards, masquerading as Malaysians for jobs and benefits. Yet, many of our young people, including graduates, are either underemployed or unemployed.

Q: Is the current leadership capable of pulling Malaysia out of this quagmire?

TR: As I said earlier, the political leadership has come through before. With that experience, and if the Prime Minister can take on board the good advice being given, beyond listening to his immediate circle of advisers, even taking the more urgent measures and implementing them quickly, the current leadership should be able to come through again this time. But will they?

Q: Rising government and household debt, leakages in public finance and spikes in the cost of living are among our main economic problems. They also leave Malaysia very vulnerable to external shocks. As a former finance minister, what would be your recipe to deal with these problems?

TR: With the prospect of decreased revenues from Petronas dividends by as much as 37%, coupled with the prospect of a current account deficit looming over the horizon and the threat of a depreciating ringgit leading to higher inflation numbers, I think the government will have no choice but to reduce spending next year.

It may be by as much as 10% if the crude oil price drops to US$60 per barrel for example, and more if it dips lower than that.

To ease the burden on the people, especially the lower income group, the government may have to consider postponing the implementation of the GST, as I have already proposed.

Q: What are the other concerns the country’s economic managers need to focus on?

TR: The government has to rein in the monopolies and concessions, including the disproportionate subsidies to industry. Maybe also, like South Korea has recently done, the government should tax cash outstanding in corporate accounts at home and abroad.

Malaysians, I am told, have a lot of funds held overseas, so why not impose some limitation on their tendency to keep their wealth, especially cash, outside the country?

I also think the government should be more forthcoming in explaining things like the actual government debt position, the worries about 1MDB and the huge debts incurred by some of the oligarchs and so on.

We cannot let the general perception deteriorate to the level of Greece or Ireland as that can quickly turn into a general panic. It will then be too late for the government to impose austerity measures and we may end up having to beg for loans from the IMF and foreign governments.

The government shouldn’t leave things till it is too late. It has be more proactive in these threatening times. Now is also the time for the government to put into motion measures to cut food imports as this has caused a massive drain on our foreign exchange.

The federal government and its agencies, with the cooperation of the state governments and their agencies, must encourage food production by giving incentives so that idle land can be utilised to grow food for the people. Hence the importance of having a good Food Security Policy and System. The government and its agencies must ensure that profiteering is minimised.

Q: The Umno-led government is becoming increasingly tone-deaf to advice from former leaders, such as former premier Dr Mahathir Mohamad, Tun Daim Zainuddin, your successor in the finance ministry, and yourself. How do you see your role if advice isn’t considered?

TR: The government should be more open and ready to accept good advice and adopt the necessary measures needed to solve the problems highlighted. Even if they don’t accept my views, I will continue to say what I have to say as a concerned citizen and an MP for the sake of the people.

The government must be seen to be listening to the people, especially those in the lower income group, and the young who have placed their future in the government’s hands.

Q: Umno’s appeal among the Malays and Malaysians in general has been slipping. Is the party and the coalition it leads living on borrowed time?

TR: Yes and no. There is such a thing as being in power too long and there are those who say that the BN government may be approaching the end of its shelf life, just like what happened with the LDP in Japan, and the Congress Party in India, or with Winston Churchill the war hero, whose party was rejected by the British people who chose to have more capable managers handle the post-war reconstruction.

So, indeed, as you say, the ruling coalition is living on borrowed time unless the party and the government undertake the necessary reforms and adapt to the changing circumstances, as Umno and BN were able to do all those years before.

But I do not know whether the present leaders are listening to the people, particularly the young. At this moment I am not optimistic that Umno and BN are capable of reforming in order to make a difference. We will have to wait and see. I hope it is not too late.

Q: Will you consider leaving the party if it doesn’t embark on a serious reform agenda?

TR: For the moment I have a platform and am guided by the people who voted for me. As I have said, I do not know whether the party is capable of reforming itself. The issue is whether the leadership is listening and prepared to act accordingly.

I am not sure whether the leadership of the party outside the ruling group is capable of putting their house in order and put their acts together in order to chart a new future for the country.

It appears that the alternative is not that attractive either. We have to be serious about what we are doing, and cannot just bury our collective heads in the sand. I do hope there are enough cool heads to steer things around.

Q: Your thoughts on Petronas and the government’s over-reliance on the national oil company to finance its budget.

TR: This is a long-term concern. That’s why we implemented plans to move away, through industrial diversification, towards non-oil sources. But we are a rich primary producing country and suffer from what economists call the Dutch Disease.

That tends to delay our full industrialisation and get out from this middle-income trap that we are now caught in. We have no choice but to move to a knowledge-based economy, seek a higher value-added industrialisation based on increasing productivity and higher wages, if we are to achieve developed nation status and a fairer society.

Q: As a founding member of the national oil company, was it ever envisaged that oil-producing states would be penalised of their royalties in the event they fell to opposition hands?

TR: Certainly not. Petronas is not a political party but a creature (company) of law. The Petroleum Development Act of 1974 was enacted in order to control the oil and gas resources of the country for the benefit of all Malaysians.

Towards this end, the state of Sarawak spearheaded the move in line with the PDA provisions to vest all its oil and gas rights in Petronas. The other states and the federal government followed suit to vest the oil rights in perpetuity for 5% cash payment.

The agreements were not signed by the state authority with the federal government but with Petronas. Whether the state government is controlled by the opposition or not, is not a matter for consideration by Petronas because these resources belong to the people and the states whether they are oil producing or not.

It is a coincidence that the oil resources are found in the offshore areas of the states which are relatively less developed. This is why a cash payment is paid to the state governments concerned since no oil is found onshore.

The federal government and all the states which vest their oil rights in Petronas are aware of this fact. Otherwise why should a state which has oil onshore expect only 5% payment when they could have all the oil revenue to themselves?

When the concessionaires relinquished the whole of the concession area after 1974, they were given the opportunity to enter into a Production Sharing Agreement. They could work the areas agreed but any area left untouched would have to be relinquished to Petronas for other contractors.

With the enactment of the PDA, it was never the policy to give out chunks of areas to anyone that could enable them to hawk it around for rent. Everyone must be actively involved in the production of oil in areas obtained through open bidding in order to benefit the people of the land. The surplus funds obtained from exploration and sale of oil should help create a sovereign fund for the future generations.

Petronas cannot and should not be treated as a “piggy bank” at any time. It is time that the Petroleum Advisory Council under the Petroleum Development Act be incepted to advise the prime minister on the way forward for Petronas and related energy policy. Proper representation and the right people should be appointed to advise on Petroleum and Energy Policy of the country.

Q: The Malaysian government’s penchant for using draconian laws, such as the Sedition Act, to silence its critics mirrors a theme that is recurring in much of Southeast Asia, where democratisation is either stalling of going into reverse. Could you comment on this?

TR: Democracy has its advantages as well as its limitations. Being developing states, many Southeast Asian countries are under pressure to achieve greater economic progress for their people. Different governments have adopted different approaches to the question of proper governance. Some, depending on internal circumstances and their history, have adopted models of liberal democracy or transparent use of state power, while others take a different route.

The aim, however, is to achieve political participation with accountability. Some are able to undertake political reforms while others are moving somewhat slower towards effective governance through the rule of law and democratic institutions.

Asean, as a whole, once it achieves greater levels of economic integration and prosperity together in the years ahead, and once its people have their basic needs, should push for some convergence for greater openness and democratic practices. – December 12, 2014.

* The Edge Review is Southeast Asia’s only weekly digital news magazine covering regional politics and business. To receive a free three-month trial subscription and to read this story and other news in this issue click here.

  1. #1 by winstony on Sunday, 14 December 2014 - 1:15 pm

    Ku Li, stop dithering and join the opposition!!!
    You’ll be able do more good for the country.

You must be logged in to post a comment.