An open letter to Bloomberg

— Idris Jala
The Malay Mail Online
June 20, 2015

JUNE 20 — When I read William Pesek’s latest commentary on Bloomberg View, I barely recognised the country he was writing about. He starts by referring to Malaysia’s “underlying economic distress” and “prolonged slow growth”, which he says are caused by “race-based policies that strangle innovation, feed cronyism and repel multinational companies.”

The facts, however, are these:

1. Between 2009 and 2014, Malaysian Gross National Income grew by 47.7 per cent.

2. Growth last year was six per cent, and over the next four years the OECD predicts Malaysia will enjoy annual growth of 5.6 per cent. It would be perverse to characterise this as “slow”. By contrast, the Economist reported last month that “The European Commission is forecasting growth in 2015 of 1.5 per cent, which would be the euro area’s best outcome since 2011.” A growth rate nearly four times that of some of the most advanced economies in the world hardly suggests “distress”.

3. Prime Minister Najib Tun Razak launched Malaysia’s ‘Economic Transformation Programme’ in 2010. Let me highlight some key achievements:

– Firstly, in the last 5 years, annual investment growth has been 2.5 times more than in the preceding years. Each year, total investment reached a new record for Malaysia. The bulk of this investment is from the private sector. If the private sector has no confidence in Malaysia as alleged by Mr Pesek, why would they put in record investment year on year under the Najib administration?

– Secondly,‎ the country’s fiscal reforms are being successfully implemented, cutting Malaysia’s fiscal deficit for the past 5 years, while keeping public debt at only 53 per cent of the GDP. This level of public debt level is far lower than in many countries, such as the US, UK, France, Japan and Singapore.

– Thirdly, as detailed in the World Bank’s Global Economic Prospects report 2014, Malaysia’s efforts at reducing poverty have been a great success, virtually eliminating absolute poverty to less than 1 per cent. Since 2009, the income of the bottom 40 per cent households has increased by a compound annual growth rate of 12 per cent, even higher than the national average of 8 per cent. Inflation has been kept in check at only 2.4 per cent. And through the implementation of minimum wage legislation, we have lifted 2.9 million people immediately out of absolute poverty.

– Fourthly, we touched the lives of 5 million people through rural roads, electricity and water projects. This represents possibly the biggest government expenditure over a 5 year period in the history of Malaysia. All of these were done in the name of inclusive economic development.

4. That should be enough to dispel the suspiciously negative picture Mr Pesek paints. But let me address some of his other inaccurate accusations too.

As for the alleged failure to “dismantle race-based policies that strangle innovation”, let me quote from a report in a respected international news organisation:

“Malaysia eased rules governing overseas investors, initial public offerings and property purchases, peeling back decades of benefits to ethnic Malays. Foreign companies investing in Malaysia and locally listed businesses will no longer need to set aside 30 per cent of their equity to so-called Bumiputera investors, Prime Minister Najib Razak said today. He also raised overseas ownership thresholds in the fund management industry and at local stockbrokers.” At Initial Public Offerings, “Publicly traded companies will no longer have to meet any Bumiputera equity requirement under today’s liberalisation measures.”

If Mr Pesek disagrees with any of the above, perhaps he might discuss it with his editors. The report was published, after all, by none other than Bloomberg.

5. At another point, he writes that Prime Minister Najib has “deepened the economy’s reliance on oil and gas production”. The International Monetary Fund believes otherwise. The headline on its “Economic Health Check” report this March was: “Favorable Prospects for Malaysia’s Diversified Economy”.

6. Mr Pesek rounds off his imaginative piece of writing by declaring that “the ringgit’s fluctuations are a decent summary of the country’s wayward course in recent years”.

Perhaps he would like to discuss this with Malaysia’s Tan Sri Zeti Akhtar Aziz, one of the most admired central bank governors in the world. She has repeatedly said that the ringgit is undervalued. Here is what she said recently: “When the oil price plummeted, the wrong perception of the degree of dependence of the Malaysian economy on the oil and gas sector led markets to think that we would be more affected than others. Of course the ringgit is undervalued. It doesn’t reflect our underlying values, which are solid and strong.”

7. Mr Pesek’s opinions do not seem to have a strong connection to the facts. He gives away his true agenda when writes that “Asia-based journalists have missed Mahathir Mohamad since he left office in 2003” and suggests “a return to old political leadership” is “urgent”.

It may be that nostalgia for the past and his distance from Malaysia have clouded his judgement, and led him to write an unsubstantiated hatchet job on the current prime minister in order to please a former prime minister about whom he gushes, his “mercurial governing style and fiery rhetoric made for great copy”.

He certainly seems to have changed his mind about Tun Mahathir. Only last year he wrote: “The insular and jury-rigged system of affirmative action, national champions and fat subsidies over which Mahathir presided now holds the economy back. The Malaysian leader also had a tendency to embarrass his nation on the international stage with his nutty anti-Semitic tirades.”

He concluded: “Malaysians must find fresh inspiration by looking forward, not back to 1990.” We agree. Why does Mr Pesek now think we should look back to a system he described in such a derogatory manner last year?

8. Malaysia has undergone an impressive economic transformation under Prime Minister Najib and the country is on course to reach the goal of becoming a high income status nation by 2020 — as the figures and achievements I have mentioned above make clear.

Because of our achievements, I was invited to share our experience at both Harvard and Oxford Universities this year. At the Harvard Kennedy School of Government, I had the privilege to share Malaysia’s success story with government ministers from many countries. Last month, I was invited to share our experience with Russian cabinet ministers in Moscow.

9. I wonder why it is that many countries and institutions can see the progress we are making, but Mr Pesek chooses not see any of it? His latest outburst is consistent with a series of slanted articles that unfairly run down Malaysia and its leadership.

10. Differing opinions are bound to be expressed on Bloomberg View. The defence of “fair comment”, however, does not apply to getting facts so woefully wrong. We would hope that the editors at Bloomberg agree, and will correct or take down such a disgracefully biased and ill-informed article.

  1. #1 by waterfrontcoolie on Monday, 22 June 2015 - 8:55 am

    Yes, both UK and USA need our advice as their growth rates are rock bottom and if we have to use them for comparison then it is okay! Though our ringgit keeps sliding down the slope; well it is alright as our exchange rate is still better than all ASEAN members except Singapore and Thailand! Using the rest of the world for comparison appears we are doing okay! But sliding down from where we were isn’t! Do you suggest that we compete with the 4th quadrant of nations in UN list?

  2. #2 by Sallang on Monday, 22 June 2015 - 9:06 am

    This is durian season,and the gas is,’burp”, blooming in the stomach,’burp’.
    Some people cannot stomach its bloom,’burp’.
    Erh. so sorry.

  3. #3 by TheWrathOfGrapes on Monday, 22 June 2015 - 10:23 am

    /// while keeping public debt at only 53 per cent of the GDP. This level of public debt level is far lower than in many countries, such as the US, UK, France, Japan and Singapore. ///

    What utter bollocks and comparing apples with oranges.
    He cited Singapore’s high public debt/GDP, but forgot to add the footnote: “Singapore’s public debt consists largely of Singapore Government Securities (SGS) issued to assist the Central Provident Fund (CPF), which administers Singapore’s defined contribution pension fund; special issues of SGS are held by the CPF, and are non-tradable; the government has not borrowed to finance deficit expenditures since the 1980s; Singapore has no external public debt.”

    Many so-called experts had fell prey to this morsel of information. Even the Mahathir side-kick Matthias Chang stumbled onto this earth-shattering info about Singapore’s “high public debt” and called for the world to short the Singapore Dollar some time back.

    Well – the key words are “the government has not borrowed to finance deficit expenditures since the 1980s; Singapore has no external public debt.”

    Note – zero external public debt. In fact, Singapore is a net creditor with tons of foreign reserves and gold.

  4. #4 by Bigjoe on Monday, 22 June 2015 - 1:53 pm

    Between 2009 and 2014, GNP grew 47.7%.. My plate of Chicken rice when from RM3 to RM6..What is the point?

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