Pardon me for raining on Najib’s sweeping economic “liberalisation” parade.
For one thing, I don’t think the government fully understands the ramifications of its gung-ho approach to liberalisation in the services sector, especially the financial services sub-sector. Still beholden to the FDI-driven model of economic growth, the government is obviously hoping that its “liberalisation” will result in hordes of foreign investors stampeding into the local market. Sure, more big investors might come in – but at what price to the local economy and small-timers?
The Chinese Malaysian business sector might welcome the removal of bumi quotas. Fed up with paying high prices for “protected items” such as locally made cars, many ordinary Malaysians too might actually welcome “liberalisation” – and I can understand where they are coming from.
But have we considered all the implications? The Bar Council is already worried about the move to allow foreign legal services firms to enter Malaysia to advise on Islamic finance. This is just the beginning.
What happens when the big boys – the MNCs, with their huge resources – muscle into the local services sector? They will be prepared to make a few years of losses to kill off local competition in all sorts of areas – ranging from financial and banking services, tour agencies, and even the management of homes for senior citizens – which we haven’t even thought of.
Okay, they will create some jobs, but what about accessibility in critical areas such as health care and education. Will they cater only for the rich? What will happen to local businesses in the long-run as the MNCs flex their muscles and exert their power?
But the area which we should be most concerned about is financial services liberalisation. First, there has been a disconnect between this sector and the real economy, fuelled by the drive to seek ever-higher returns for surplus capital when the real economy itself has been stagnating due to overproduction (at a time when those who need such goods can’t afford them because of low wages). This has led to periodic bubbles in the services sector – booms and bust due to speculation. Some of the financial giants that could seize the opportunity to expand into Malaysia or acquire stakes in local banks and insurance companies could be the very ones that have received public bailout money in their home countries.
It was precisely financial deregulation and liberalisation in the developed economies that got the world into this mess in the first place.
At a time when many countries are now questioning this financial deregulation and liberalisation model and trying to make their domestic economies more resilient and independent, here we are opening the floodgates to something we don’t fully understand. This is precisely the route that MNCs want developing countries to take: they want to prise open developing countries’ markets through the WTO, Gats and now FTAs such as the EU-Asean FTA.
The Najib administration should not hand over our local market to these MNCs on a silver platter without realising the long-term implications for local businesses and the domestic economy.
Anil,
You have made a point that most people are not seeing. I saw some of the conditions for liberalization in more detail from other blog posts and finance papers. They are nothing for most of the Malaysian population to get excited about. For example, only 4 & 5 star hotels are exempted from Bumi quotas. With conditions like these, I can imagine that the average Malaysian entrepreneur is just out of luck. There will be no break for him from the stifling quota system. The breaks only go to the big boys, but not your average Malaysian businessman. And we must remember that the majority of businesses here in Malaysia are micro, small and medium businesses. They form more than 85% of the businesses in Malaysia. So, once again we have only a small number of people benefiting. Instead, perhaps what we should have is a quota system (not limited to one particular race) for big business – 40% Malaysian owned. And no Bumi quota for the smaller businesses. Also we must remember that what Najib has proposed doesn’t address the demand side. There are still quotas in place for that. For example, we know that the big banks in Malaysia won’t use the services of law firms that aren’t at least 50% Bumi owned! So what good is it to set up a five star hotel free of racial quotas when it would have no access to doing business with GLCs and other lucrative businesses? So not much has really changed for the average Malaysian. But now we have the added threat of MNCs putting the screws to smaller Malaysian businesses. Too many people are applauding these “reforms” without really understanding them. I really hope they wake up and smell the coffee soon before there’s no coffee left.
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close down all karaoke and places selling beer and liquor immediately.
top chinese executives from all companies (especially in KL) under the pretext of entertaining customer after work
are wasting their time and increasing the companys expenses.
on top of this nonsense hanky panky
are aplenty.
the govt should ban all this nonsense immediately and urged all
executives and above to go back to their respective families after work.
i am chinese and i support PAS 100%
on banning of alcohol.
alcohol is nothing but trouble.
i am very sure all the chinese housewives and whatever will
support 100% PAS good intention.
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Can you imagine within two weeks in power and out of the blue he came out with such decision. I don’t believe, the night before he made the statement that he had a dream – wonder wonder what a fantastic PM the nation has!!! Better for him to watch “Alice met Humpty Dumpty” and he will not regret later.
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Anil,
I look hard on the issues commented by you on the liberation of the economy by Najib. Everybody knows its a knee jerk reaction. Very high expectation, lots of activities but no significant achievements. Frankly, I don’t blame Najib for such decision. Anyway, he’s not well trained in stimulating Economy. Not even Mahathir as he has turned Malaysia into a Mickey Mouse economy.
However, there is no easy solution. You see something got to lose. In the plight of globalisation, there is no such thing as secured employments or secured businesses. Seriously, I too don’t have answers. Not even Thaman, Singapore Minister of Finance too for Singapore economy.
I felt that strong enhancement of Malaysians in terms of necessary skills. Well, too bad lor……People got to ship up or ship out
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I read with such sinister of Anil’s views of the liberalization announcement.And i personally think looes74′s statement “..Thaman,Singapore of Finance…” don’t have answers to the economic problem now.
Firstly, i can’t understand why such brilliant Anil cant see beyond the announcement wt long-term perpective…I think your article are too short sighted that you have lost it.
Secondly, when you argue abt allowing foreign legal firms to open up office to advice on Islamic Finance, maybe you have forgotten (or you dont want to recall), that Malaysia is positioning to be an Islamic Financial Hub (and is being acknowledge my Middle eastern countries that Malaysia has among the best Islamic finance in the world..do a google search and there are numerous articles on it)…but how can we achieve further if we don’t have international standard supporting entities (ie businesses/legal/personnel) to support our ambitions? Also, Malaysian legal firms and Bar Council, wld be able to learn more by woking with these new firms, creating new knowledge among our legal fraternity, exposing new ideas and success stories implemented elsewhere? Learning is a continuous process my friend, but once we start thinking that everything is a threat, we will be left behind…imagine if the islamic finance do take an upward movements in the future, our legal fraternity wld be able to export its knowledge and services…the way I see it now, the Bar Council are just “jaguh kampung” coz to date, we have yet failed to truly build a world class legal entity…but yet the Bar Council been arguing abt “local” issues and protectionsm and liberalization (but when “kena batang hidung sendiri”, they start to jump)
Thirdly, in the age of globalization, we have to accept the fact that our businessmen (regardless of race), have to compete effectively in the global arena. They can do these when they are exposed to world class organizations..like you mentioned 4&5 star hotels are exempted fm Bumi quotas…meaning bumi now must compete at par with other malaysian businessmen in this field and to acquire additional expertise if they were to survive in the future. Sometimes we need to allow this else we become complacent in the future and unable to compete when true globalization occurs.
Lets open up our minds…be positive…if everything the govt does is wrong, we will show them we dont want them during next PRU…but for now, i believe, we shld give our little support to the govt to take necessary initiatives to protect our livelihood, peace and harmony…we are facing an economic threat (trust me, its not necessarily only the govt’s fault as the entire world is experiencing it) and its time we join hands to help the country rebound and stop all this politicking abt how bad the govt is..even if it was bad, lets put pressure on govt to have check and balances and public scrutiny…but when you are encouraging negative thoughts, i despise that, as it will make the country worse.
Why am i disapoointed wt all theses negative blogging and perspective? I run my own business and it has affected me badly…and all this politicking, its hurting small time businessmen like me…grow up..there are huge challenges ahead for us as a nation to survive this economic crisis and all this negativity will not help…but when we can sit down, think rationally, provide support and hope, we can move on to greater heights.
My.Positive.Perspective
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Bangsa Cina, don’t call yourself Chinese because no one know (who you are on) the internet.
You are … absurd like some religious racists. Some people do not eat pork, so they are demanding others to mimic them by banning pork selling in the “open” market.
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Anil, you got two choices, open the market to let foreign big fishes come in or continue to let local big fishes to monopolize service sectors.
I don’care the service provider is local or foreign as long as they give me value for money services.
- Have you tried Melaka River Cruise? The service quality is poor besides overcharging tourists illegally. The Star had published my complaint against the cruise operator last week.
- Have you received affidavit written by any local law firm? The affidavit is no more than a love novel.
Our local companies especially bumi companies are (performing poorly) because they are protected for too long.
Don’t find excuses if you are weak and connot compete globally.
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In this one instance Anil, I disagree with you.
The Bar Council needs to wake up and offer me competitive services. With anticompetitive regulations to protect poor performing lawyers such as the “No-Discount-Rule”, I personally believe that we must allow the markets to determine what is best for them. Do I really care if a European lawyer can offer me better services than a Malaysian lawyer at a more competitive price? Of course! I want more bang for my buck.
But more interestingly, opening up the financial markets will potentially allow Malaysians to enjoy greater choices, bring down inflated prices and everybody benefits. I will be the first to agree with you that this also means that some incompetent businesses will lose out and people might be retrenched, but that is a temporary side effect that we need to address and go through in order to develop a more mature economy.
I think it’s unfair to equate the current crises with Liberalization of markets. I would say that the distinction here is that Regulation failures, not liberalization, caused the market crash of 2008.
I for one welcome our new competitive overlords.
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Liberalisation is good when it moves service providers to compete each other and produce excellent service.
It is time that the people get value for money. Since independence the service sector has under-performed. Take for example the TmNet internet service…always disrupted. They never learn to improve because they are protected! The list of public grouses about the service sector is too long.
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The best things in Life are free it is said.
That is why so many people all through human history have been willing to lay down their lives for the cause of winning and protecting Freedom and the fundamental Good that lies within it.
Freedom is however, always responsible, that is why it is a Good. Freedom that is a unrestricted free-for-all is an irresponsible Bad which will ultimately and inevitably lead to anarchic destruction.
Everything in Life thrives and grows exponentially when there is free access to responsible freedom open to it.
The economics of business too thrives in open, free well-regulated markets and competition.
That is the principle that forms the logic behind a good capitalist system. Responsible capitalism is the good democratic governance system’s economic wealth-creating sub-system. The capitalist system operates internally WITHIN the nation’s primary intranet of the governance systemic structure/environment created by the nation’s society and managed by their Government. It also operates externally to connect that nation and its economy with the extranet of other nations and national economies that make up the linked newtwork of the trading economic world.
Therefore, the world’s networked capitalist system is a highly interconnected one and consequently, it is highly inter-dependent one too. Free trade and free competition should in principle help to lift and transform the whole through both catalytic and synergystic learning and growth. The whole network therefore needs coordination through regulation to be healthy and fit for purpose.
The liberalisation you are talking about now is a small micro-element of that whole/global capitalist systemic structure. A democratic Malaysia and her markets must be free to operate in that systemic climate if her economy is to thrive and grow.
So IMO, liberalisation of claustrophobic, cloistered and unfairly protected by the NEP Malaysian Ali Baba-run markets can only be good. But only so long as appropriate coordinated regulations/controls are put in place at the same time to ensure that open free competition does in fact mean responsible market freedom and not one that means an out of control, free for all that is overly driven by GREED, whether by locals or MNCs, and which will then inevitably, break down the system and prove too costly for every Malaysian and the whole nation in the end.
If you are the best, you have nothing to fear from free open competition because the principle of abundance and transformational learning will work together to enhance and synergise the growth of the whole.
If on the other hand, you are….er….rubbish at what you do now, then you have two choices.
First, you can either choose to face the challenge head-on and learn from others who are now better than you, and who have got to that higher standard of being better than you because they operate without compromise on the growth concept of wanting to be the best of breed in the world at that business, knowledge, skill or whatever else. Or, you can opt to FEAR the good competition with the best and so waste your energies and time fighting, pointlessly, to stop the inherent good that we all KNOW exists in free and responsible competition based on the principle of a good and responsible Freedom.
As for the free market competition affecting the now allegedly monopolistically mollycoddled and anti-competitive, protective policies-laden internal market of the Bar Council, or that of the MMC, then that is, as far as I can see, a welcome good change for all Malaysian legal customers and more importantly, for Justice. I for one have no love lost for either the Bar Council or the MMC.
And I have a particular bone of contention to pick with the Bar Council and the Malaysian Bar as I see many in them as being unprincipled and having colluded and/or pandered (for likely access to easy wealth through patronage and pointless and cheap titles) like unconscionable weaklings for far too long to a malignantly destructive UMNO/BN Malaysian Executive who, I have no qualms in saying most likely set out to systematically destroy the principle of Justice and the power of the Rule of Law in Malaysia and who unfortunately, finally succeeded in doing just that in 1988 when it attacked and destroyed the independence and power of the Supreme Court and its leading Judges. And amazingly, that dangerous and heinous deed done without so much as even a pipsqueak being heard by the People from the neutered MSM lapdog and worse, not even from the rest of the so-called “learned” members of the “esteemed” Malaysian Bench or from that associated, so-called legal voice of reason and conscience: the Bar Council and The Malaysian Bar, whose members,in my view, knew exactly what was happening then and yet did not take the required moral concerted steps to stop the massacre of the Rule of Law and the death of Justice in Malaysia.
So….open them legal, medical and other protected, non-functioning Malaysian markets up I say!
“Imagine Power To The People” John Lennon.
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Is our foundation strong?
In our economies we must have strong pillars
Else we will be cornered and surrendered our economic rights
Opening up liberalization is an economic gamble
The Bee Anne government hasn’t thought it through
The NEP is used to spoon feed one race
Now Bee Anne wants to push them out to compete
A domestic trained animal can’t survive in the wild
When there is no exposure to handle the competition
The survival of the fittest will fail……….
The SME companies employed the most people
These companies supplied the activities of economic growth
Some are family owned; others are joint partnerships or companies
Growing internally surviving on what they can find locally
Competing globally needs financial muscles
And marketing and connections involved
it isnt an easy way to stare at the world’s economy
It is a jungle out there!
When the companies aren’t ready to compete
Struggling to survive internally…………..
Liberalization will push the setbacks
The giant will crush them without mercy
This is what liberalization will do
Are we ready economically to challenge the world?
We hear other business CEOs welcoming the news
It is the wealth they think they will make
About employment opportunities it is still debatable
Since now it is borderless economy………….
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I too tend not to support Anil’s contention here. Between the racial protectionist policies and liberalisation, give me the latter any time.
Secondly, I don’t think the government is that dumb. They have seen how Singapore tackled the issues raised by Anil. Anil seems to be uncharacteristically or unreasonably alarmist. Besides it seems too soon to pre-judge Najib’s government when the details are not even know yet.
Last but not least, since Anil can question Najib’s credentials, perhaps I too can question Anil’s? What is your education and experience background, Mr Netto?
All said and done, my first reaction to reading your comments is that you are writing a PR piece for your lawyer-friends.
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The current financial crisis was partly brought about by the deregulation and even, in some cases, abandonment of operational controls and rules. Nothing to do with ownership and equity rules.
Our services sector badly needs increased competition to become more competitive. Many service companies in that protected services sector of the economy have become complacent, over-priced , even arrogant.
Having said that, for all the hoopla surrounding Najib’s announcement, there’s really very little substance in it.
Sleep well, the barbarians aren’t about to storm through the gates.
Only a very tiny side-door has been partially opened.
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Suresh writes: “I think it’s unfair to equate the current crises with liberalization of markets. I would say that the distinction here is that regulation failures, not liberalisation, caused the market crash of 2008″.
To which the only response can be: Suresh, where have you been hiding? This is one thing on which there is now a virtual consensus. Why do you think everyone is talking about the need for a new regulatory framework?
And, yes, “liberalisation” does generally mean “de-regulation”. So, yes, there was regulation failure — due to liberalisation, which allowed what Warren Buffett has called financial WMD’s to develop, and blow up the market, spectacularly.
Indeed, after loud denials last year when there was this huge run-up in commodity, including food, prices, there is now acceptance that much of it was due to speculation — as funds left the tanking ABS’s, CDO’s, etc. and flooded into commodity futures. And we are now told that, despite warnings — check out the US Congress website for hearings on this issue — there was a take-down of any attempt to introduce new regulations by the CFTC.
Consider: is it any accident that over the past thirty years, we have lurched from one financial crisis to another, mostly localised, hence allowing the “high priests” of market fundamentalism to blame the victims of the crisis, until we hit the jackpot, the slow train wreck of 2007 becoming the spectacular supernova of 2008 and the Great Recession of, if we are lucky enough, 2008-2010, if not, possibly 2008-2018, the lost decade.
Incidentally, regarding “allow the markets to determine what is best for them”, the efficient market hypothesis has tanked so spectacularly that it’s likely going to be one of the first things to be revised in the next editions of textbooks. Did you see Alan Greenspan’s face when he testified before the US Congress “I am shocked, shocked”, acknowledging that his ideology of a life time had let him down?
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I think Anil is spot on warn us of the Pandora’s Box. The financial sector had lost much of it creditability, albeit Madoff and sub-prime loan scandals. Obama is coming up with smarter regulations and until this framework is articulated, Malaysia should hold back on MNC.
(see Jon Stewart & Cramer ‘interview’http://www.youtube.com/watch?v=Vi6bxKAAHzQ).
The PM should work on 3 things.
EDUCATION
EDUCATION
EDUCATION
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Liberalisation does not necessarily mean deregulation. Quota only impede competition which is bad for consumers. In any sector, regulation to ensure fair competition and good governance is good for the consumers and the economy of the country. A strong consumer organisation in the country will help to check its abuse and educate its citizens.
We have quota and in the car industry,Consumers have to pay a high price for locally manufactured car compared with import.How long can we sustain this?
The recent financial meltdown in the West is due to the lack of enforcement of good governance and accountability of their financial sector.
Give liberation a chance and we should encourage more!
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This is an utterly bulls*** article. First you want the gov not to practice protectionism against the non Bumi but when the gov decide to liberalalise, you want the gov to practice protectionalism against the foreigner.
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Deng Xiao Ping once said :
“It does not matter whether the cat is black or white; as long as it catches the mouse, it is a good cat.”
It does not matter whether the Bumi, non-Bumi or foreign company; as long as it provides services that are value for money, it is a good company.
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I have to agree with Anil’s concerns. The reason is that BN’s reforms are insincere and BN is merely trying to please vested parties in the hope of getting back votes.
Malaysia suffers from severe systemic problems that are no easy fix. Fix corruption, skewed judiciary, PDRM m…, money politics, etc first. These are the main reasons why Malaysia cannot improve except for the UMNOputras and cronies.
If the foundations for a strong economy are not fixed, whatever being proposed and implemented will only succeed in patches at best. Lets not be too naive and be hookwinked by BN who has been in power for over 50 years but has performed so badly (just benchmark against Singapore which was part of Malaysia). No, I think Malaysia can never improve under BN. If one really wants a better future for their children, one must reject BN and teach them a lesson they will never forget.
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YOu cannot say liberalisation caused the financial crisis….in the US its ANARCHY ie absence of any regulation that caused the fiasco. Liberalisation does not mean anarchy, free for all. M’sia is a small country & free trade is very important to us becos local consumption cannot bring the growth we would enjoy. M’sia is still a very protected controlled economy. Ever wondered why oil & commodity prices come down our toilet paper price still goes up? ANy of you fresh grads or new workers out there find it very hard to buy a house? it gets harder for the next batch? Truth is our income levels have remained stagnant over the years. We need to open up…even if it means foreigners come in, it may bring in knowledge & technology. If we wanna stay protected then go live in North Korea or Burma lah….stop this socialist c…!
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Anil,do not have to worry about Malaysian business people,they are rich already and even tough they have to close shop as a result of competition from foreign MNCs,they can still retire with load of money in their pockets.We have to be concerned about the people of Malaysia who are wage-earners.I do not mind if all malaysian business men got kick out of business so long as the people of Malaysia are able to get a good job and earn good salary.
Lets foreign MNCs show us Malaysians how a business should be run and how workers should carry themselves.It will be better if Mc Donald’s were to bring in Americans to serve us as these people are more efficient compare to the local who are mediocre.
Anil,if our government could be privatised,i don’t mind the MNC to take over as they are better,less corrupt and efficient.
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