Awakened, we arise

Awakened, we arise

By Chua Jui Meng

YEAR in and year out, the Barisan Nasional (BN) government dismisses the Auditor-General (A-G)’s report with utter disdain.

The bloated procurements highlighted by the A-G are ignored, no action is taken against those responsible for stealing from the national coffer.

The inaction sent a wrong signal to both politicians and civil servants that the BN government tolerates and encourages graft. This explains why corruption in Malaysia, from top down to bottom, has become blatant, unabated and is no more manageable today.

It has become a ‘you scratch my back, I scratch yours’ practice to enrich each other at the expense of the welfare of the people and country.

According to Deputy International Trade and Industry Minister Muhkriz Mahathir, the federal debt is at RM800 billion.

How in the world could a natural resource-rich country like Malaysia end up with such a massive debt compared with the tiny island state of Singapore should be clear to everyone the BN has mismanaged our wealth to enrich political cronies and the elite.

Even MCA president Chua Soi Lek can insult us, without fear of any political repercussion, by saying that the A-G’s report will not have any impact on voters in the next general election.

Unfortunately and sadly for Malaysians, he is not all that wrong this time. His brazen statement is due to the rakyat (people) continually giving their mandate to the corrupt Umno-led BN to govern and plunder for more than five decades.

I do not need to go into the details because every year the A-G’s report is riddled with bloated spending. For those who wish to study the details, this is the link: http://www.audit.gov.my/index.php?option=com_content&view=article&id=639&Itemid=11

What I wish to remind Malaysians is the urgent need to change before it is too late. We cannot afford to wait until we are the Greece of Asia or Southeast Asia to wake to our senses.

It is clear BN-Umno cannot change its super corrupt ways and will continue to enrich themselves through crony businesses.

They do not fear bankrupting Malaysia because, with their ill-gotten gains stashed outside Malaysia, their future is financially secure.

They can either migrate or continue to use their sinful wealth to further enslave us in a bankrupt country.

And now, why should the highly respected Bank Negara (central bank) Governor Zeti Akhtar Aziz come out in support of BN’s plundering by saying Malaysia can withstand capital flows.

Like all other federal institutions, the central bank comes under the hegemonic control of Prime Minister Najib Abdul Razak cum Finance Minister.

The issue here is not about whether we can withstand the outflows. It is about curbing and stopping money laundering, not condoning it. Allowing a man to carry RM40 million without an iota of suspicion is simply ridiculous, to say the least.

I have reproduced below an asia sentinel consulting report titled “Malaysia’s Disastrous Capital Flight” for a further read and understanding of our precarious financial standing in the world.

There is also another report that Malaysia lost RM893 billion in capital outflows. By 2009, it was RM1.08 trillion! Please explain that, Zeti.

The huge outflows of illicit funds mask the actual widening of wealth between the political economic elite and the man on the street.

The disparity of wealth continues to widen unabated under the Umno-led BN government.

BN-Umno wants us to believe that if Pakatan Rakyat (PR) is given the mandate to rule, Malaysia will go bankrupt. It is the corrupt BN-Umno that will surely bankrupt us.

Here are the three damning reports on our economic nightmare:

Zeti Says Malaysia Can Withstand Capital Flows: Southeast Asia

By Shamim Adam - Oct 16, 2012 1:57 PM GMT+0800

Malaysia can manage capital inflows due to monetary easing in advanced economies, central bank Governor Zeti Akhtar Aziz said, as Asian nations take steps to prevent asset bubbles after the U.S. boosted stimulus.

The country has policy tools and the flexibility to absorb any excess liquidity, said Zeti, who oversaw Malaysia’s response to capital outflows during the Asian financial crisis more than a decade ago. The Malaysian economy is withstanding the impact of weakening global growth, with gross domestic product forecast to expand about 5 percent this year, Zeti said in an Oct. 14 interview in Tokyo.

Bank Negara Malaysia Governor Zeti Akhtar Aziz. Photographer:Tomohiro Ohsumi/Bloomberg

“We certainly are the recipient of capital flows but the Malaysian financial system has reached a level of maturity in terms of development and in its functioning that is able to intermediate these flows, both surges of inflows as well as reversals,” Zeti said. “The effects are disbursed through the financial system rather than concentrated.”

Malaysia joins Brazil among emerging markets signaling confidence they can counter any surge in fund flows stemming from the U.S. Federal Reserve’s third round of quantitative easing. Fed Chairman Ben S. Bernanke two days ago rebutted concern that the central bank’s decision to purchase $40 billion in mortgage-backed bonds a month will cause a destabilizing influx of capital into developing economies.

Brazil’s central bank President Alexandre Tombini said yesterday his country will defend itself from short-term capital flows that bring financial instability and inflation risks amid an easing push from major economies. “We have the conditions to protect ourselves and we are doing that,” he said.

Currency Risk

Indian Finance Minister Palaniappan Chidambaram told U.S. Treasury Secretary Timothy F. Geithner the Fed’s easing may push commodity prices higher. Brazilian Finance Minister Guido Mantega said this month that QE3 risks aggravating currency problems for emerging markets, and vowed to do whatever is necessary to stop the “selfish” monetary policies of some developed nations from hurting his country’s economy. Japanese Prime Minister Yoshihiko Noda said last week his government will act against disorderly gains in the yen.

Most Asian currencies have gained in the past three months, and Hong Kong and Singapore unveiled measures to cool property prices after the U.S. stimulus. Malaysia’s ringgit has climbed about 4 percent since mid-July, the most among 11 Asian currencies tracked by Bloomberg after the Indian rupee.

First Woman

The first Malaysian woman to become central bank governor, Zeti obtained a doctorate in economics from the University of Pennsylvania in 1978, with a thesis focusing on international capital flows and implications for macroeconomic policies. She was assistant governor responsible for economics, reserves management, money market and foreign exchange operations when Thailand devalued the baht on July 2, 1997, setting off a plunge in regional currencies. The ringgit fell 89 percent in the next six months, dropping to 4.77 against the dollar.

Zeti was acting governor in 1998 when Malaysia set limits on foreign-exchange transactions and fixed the ringgit at 3.8 to the dollar. The currency peg was scrapped on July 21, 2005. The ringgit was at 3.0503 per dollar as of 1:51 p.m. local time.

The Malaysian central bank has kept interest rates steady for eight meetings, most recently in September, as the lowest inflation rate among Southeast Asia’s major economies reduced the need to tighten policy. Consumer prices rose 1.4 percent in August from a year earlier, staying at the lowest rate in more than two years.

Strong Demand

“Right now on the horizon, the risk to inflation doesn’t appear to be imminent,” Zeti said. “There is less of a risk of inflation and given that we have excess capacity in our economy, the risk is on growth. But again right now, domestic demand is still relatively strong.”

The country’s monetary and fiscal policy is already “quite accommodative,” Zeti said. Malaysia has refrained from joining other Asian nations in lowering borrowing costs this year as Prime Minister Najib Razak increases spending ahead of a general election that must be held by early 2013.

“There is no big threat to growth prospects for Malaysia and inflation has been surprisingly low,” said Gundy Cahyadi, an economist in Singapore at Oversea-Chinese Banking Corp. “There’s room for monetary policy accommodation if necessary but risks are not significant yet to trigger a cut. Any sort of boost will need to come from monetary policy rather than the fiscal side.”

Policy Flexibility

Asia has “considerable policy flexibility” to respond to external and domestic developments, although a prolonged delay in the recovery in the advanced economies would erode this scope, Zeti said in a speech in Tokyo on Oct. 13.

“It’s important for us to have room to maneuver in the event things deteriorate, and so under these conditions we should just sustain what we believe is a sustainable growth path and maintain this growth trajectory,” she said. If policy makers ease too soon, there will be less scope to do so later if “things take a turn for the worse,” she said.

Najib cut income taxes, gave civil servants a bonus and extended handouts for the poor in the 2013 budget announced last month, with the government planning to spend 251.6 billion ringgit ($82 billion) next year.

“We already have domestic demand growing, like consumption by 7 percent, and investment by more than 10 percent,” Zeti said. “This is already the limits to which domestic demand can expand without generating an overheating environment.”

Growth Quickens

The government’s so-called economic transformation program is also spurring investment and boosting sales for local manufacturers and developers. MTD ACPI Engineering Bhd. (ACP), a maker and supplier of precast concrete products, and construction and property group Sunway Bhd. (SWB) have won contracts for a mass railway project in the capital.

Economic growth accelerated in the second quarter as construction and consumption climbed. Gross domestic product rose 5.4 percent in the three months through June from a year earlier, after expanding 4.9 percent in the previous quarter.

Rising incomes and strong investment should help Malaysia achieve “good growth” in the third and fourth quarters, Zeti said. Growth in 2013 will be “much the same” unless the world economy takes a turn for the worse, she said.

Still, demand for Malaysia’s goods has eased as global growth weakens. Industrial output slid in August for the first time in more than a year as manufacturing contracted, while overseas sales tumbled the most since 2009 in the same month.

Europe’s debt crisis has weighed on the world economy and hurt Asian exports, with the International Monetary Fund cutting its forecast for global growth last week.

Malaysia will probably refrain from selling global sovereign bonds for now, Zeti said.

“The government is very cautious about entering into increased foreign debt and they have significant access to domestic sources of financing without crowding out private investment because there is ample liquidity,” she said. - Bloomberg

Malaysia's Disastrous Capital Flight

Written by Our Correspondent

Monday, 11 January 2010

Money leaves the country on an unprecedented scale Churches are not the only thing to have been going up in flames in Malaysia. Take a look at the nation's foreign exchange reserves. They fell by close to 25 percent during 2009 according to investment bank UBS even though the country continued to run a huge surplus on the current account of its balance of payments. Says UBS: "Question: which Asian country had the biggest FX losses in 2009?" The answer is Malaysia and by a very large margin; we estimate that official reserves fell by well more than one quarter on a valuation-adjusted basis". It describes the situation as "bizarre" and contrasts Malaysia with other countries with large current account surpluses – Thailand, China, Taiwan, Singapore, and Hong Kong – which have seen their reserves increase – as should be expected. In short there has been an exodus of money from Malaysia on a scale which surpasses that which occurred during the Asian crisis. Nor is this just a mirage. The decline is also reflected in a sudden decline in base money supply – even while, thanks to Bank Negara, broader M2 has continued to grow modestly. Who is responsible for this massive outflow? And where has it gone? The questions cannot be answered from the data and probably will not be by a government that knows its own state-controlled enterprises, headed by Petronas, may probably be responsible for part of it. The more certain reason however is the outflow of local private capital has been taking place on an unprecedented scale in response to political instability, massive official corruption and discrimination against non-Malays. This capital bloodletting has as yet attracted little attention because Malaysia's foreign debt levels had declined dramatically since the Asian crisis and its reserves reached very healthy levels. So the outflow has not disturbed the financial markets, and Bank Negara has easily been able to keep interest rates low and the currency strong. But unlike 1998, when the exodus of hot foreign money was a major contributor to the crisis, foreigners cannot be blamed. There is little speculative interest in the ringgit and the Malaysian bourse has rather fallen off the map as far as foreign institutional money is concerned. The BRICs, India, China, Russia, Brazil have taken the merging market lead once dominated by Southeast Asia. Nor is there much evidence that the Middle East money which was supposed to be flowing into Muslim Malaysia, into holiday apartments or Johor's massive Iskandar development zone, has been much in evidence. Malaysia's one recent success, the development of its sukuk (Islamic bond) market may have caused more capital outflow than inflow. At any rate any overall net inflow of foreign capital whether into bonds, equities, factories or real estate has been dwarfed by the exodus of Malaysian money. The latter is reflected in the weakness of private sector investment, which now trails public investment. Indeed it explains why the economy remains weak despite very healthy prices for most of Malaysia's commodity exports. The nation has been running a current account surplus of more than 10 percent of gross domestic product for the past decade and hit about 17 percent of GDP in the year just ended. Initially this surplus was needed to pay down debt accumulated during the mid-1990s Mahathir boom years and to rebuild foreign exchange reserves to healthy levels. But subsequently it became simply a consequence of the weakness of private investment. Domestic investors were discouraged by the corrupt and warped system and foreigners moved to China and elsewhere. GDP growth has become ever reliant on government stimulus – again racially biased in its allocation -- financed by a persistently large budget deficit. Meanwhile, publicly controlled capital has been rushing overseas. Petronas has been spending its billions in profits around the world as it attempts to become a major global player – at the expense of Malaysian citizenry in general and the oil and gas producing states in particular. Other government-controlled entities such as Malayan Banking Bhd have been bidding top dollar for foreign assets – such as Bank Internasional Indonesia. Often with the exodus of money goes an exodus of talent as highly skilled persons disadvantaged by race or, as in the case of some Malays, disgusted by local corruption or primitive religious authorities, take themselves and their capital to Australia, Canada, India, China, etc. The 2009 reserves loss may have had some specific cause which will not be repeated. But it has merely served to underline a dismal trend which has been in evidence for the best part of a decade. Malaysia has so far been saved from itself by the commodity price gains of the past five years – with even the late 2008 collapse now largely reversed. Oil and palm oil may be off their peaks but both are now double their prices of five years ago. It is better not to imagine what will happen to Malaysia if prices collapse to 2004 levels and stay there. Better now to address the real reasons behind capital outflow and lack of private investment. – asian sentinel Malaysia lost RM893b in illicit outflows, research shows By Clara Chooi July 22, 2012

The level of outflows was sufficient to mask the extent of income inequality in countries experiencing the capital flight, according to The Guardian. —File pic

KUALA LUMPUR, July 22 ― A colossal RM893 billion was siphoned out of Malaysia’s

economy into tax havens abroad between 1970 and 2010, a London-based research has revealed, placing the country among the top 20 nation in the developing world labelled as “losers” of capital flight.

The sum is more than triple that of Malaysia’s national debt total, which amounted to RM257.2 billion in 2011, according to previous media reports.

In the study commissioned by Tax Justice Network (TJN), a London-based organisation of professionals including economists and tax consultants, Malaysia is now ranked 12th on the list, two rungs above Singapore’s RM533 billion outflow and three below Indonesia’s RM1 trillion.

According to researcher James Henry in UK’s The Guardian today, the “offshore economy” is large enough to leave a major impact on the estimates of inequality of wealth and income in any nation, as well as the estimates of national income and debt ratios.

“Most importantly ― [it would] have very significant negative impacts on the domestic tax bases of ‘source’ countries,” Henry was quoted as saying in the daily.

The former chief economist at consultancy McKinsey, in preparing the research report titled “The Price of Offshore Revisited” for TJN, had perused data from the Bank of International Settlements (BIS), the International Monetary Fund (IMF) and private sector analysts to conclude that over the past four decades, an alarming estimate of RM66 trillion or possibly RM100 trillion has flooded out of their home countries across the globe to seep into “the cracks of the financial system”.

According to The Guardian, this was even larger than the size of the entire American economy.

The paper noted that the sheer scale of hidden assets abroad by those seeking to evade taxes suggests that the official Gini coefficient of a country suffering from capital flight would not reflect a true picture.

“Standard measures of inequality, which tend to rely on surveys of household income or wealth in individual countries, radically underestimate the true gap between rich and poor,” The Guardian reported.

TJN member John Christensen told the daily that this meant that inequality was likely to be “much, much worse” than official statistics have shown.

“But politicians are still relying on trickle-down to transfer wealth to poorer people.

“This new data shows the exact opposite has happened: For three decades, extraordinary wealth has been cascading into the offshore accounts of a tiny number of super-rich,” he was quoted as saying.

In December last year, US-based watchdog Global Financial Integrity reported that Malaysia had lost RM150 billion through capital flight in 2009 alone, the fourth highest in the developing world.

The watchdog also found that Malaysia had lost a total of US$338 billion (RM1.08 trillion) over the first decade of the century while RM930 billion had left the country between 2000 and 2008, growing to RM218 billion per year from an initial RM71 billion in that period.

The federal opposition has long railed against the ruling Barisan Nasional (BN) over its alleged fiscal irresponsibility, claiming its relentless spending and massive illicit capital outflow would soon plunge the country into a debt crisis. – The Malaysian Insider