Another "Dear Najib"

An open letter to Dato’ Seri Najib Razak

Dear Najib,

Last week you gave an outstanding speech to international investors at the Invest Malaysia 2017 conference. I am sure many were impressed with the economic achievements that have been accomplished to date under your leadership. However, I do believe that some of the facts that you quoted would require some further elaboration. Please allow me to do so, especially since one would not want to provide misleading information to foreigners who may not know any better about this beloved country of ours.

You started your speech saying that you introduced the New Economic Model (NEM) seven years ago at the very same conference, with a plan that has worked and is continuing to work. Perhaps I may remind you that one of the key approaches of the NEM’s economic development plan was to move away from “dominant state participation in the economy” towards “private sector-led growth”. An IDEAS policy paper published last year examined GLC disposal and investment exercises from 2011 to 2014 (after the NEM was published, by the way) and found that the total acquisition value of RM51.7 billion dwarfs the total disposal value of RM29.5 billion – in simple language, GLICs and GLCs combined have acquired far more than they have sold.

Second, you quoted a Bloomberg article which stated that the ringgit is “easily the strongest major Asian currency this quarter”. What you failed to note was that this is considered a remarkable improvement only because the ringgit had recently rebounded from a 19-year low. Anyone who has children studying overseas would know that as recently as January this year, the ringgit had lost about 22% since the start of 2015 and was at that point the worst-performing currency in emerging Asia. In fact, an analyst in the very same article you quote from seems to imply that the recent growth momentum is strongly related to the impending election, and asks “but what happens after it?”

Third, you said that your government is one that is committed to transparency, accountability and good regulation. I, for one, am particularly pleased that you place public importance on the need for these values in your administration. Having integrity and governance units at all GLCs – at both federal and state levels – should certainly be applauded. However, these units are monitored by the Malaysian Anti-Corruption Commission, which reports to the Prime Minister’s Department. It is difficult to see how any conflict of interest involving your administration could be avoided if the integrity and governance officers were to uncover a certain wrongdoing within their GLCs placements.

Fourth, you referred to international bodies such as the OECD, IMF and World Bank, all of whom apparently heaped praises onto Malaysia’s glowing economic performance. While the summaries of these reports may have been relatively positive, for which one can certainly be proud of, you failed to mention numerous other instances which are basically big, red flags. These warning signs are indicators that not all is perfect. I say this not with the intention of disparaging my own country – far be it that I would discourage investors from coming in to provide valuable capital for future long-term growth – but to be frank about what it will really take to move our economy forward. Unless we face the honest truth squarely in its face, we will never institute meaningful reforms and merely chug along.

On this note, you quoted IMF as saying that Malaysia is amongst the fastest growing economies among peers. The very same report also highlights that our country’s “federal debt and contingent liabilities are relatively high, limiting policy space to respond to shocks”. Second, it also says that our “household debt remains high, with debt servicing capacity growing only moderately”. These are only two points that I am lifting from the report – if one looks closer, there are serious challenges that may implode over time if left uncorrected.

Similarly, you quoted the World Bank report that states our economy is progressing from a position of strength, but failed to mention that the same report says that risks in the economy “arise from growing threats of protectionism” and that there is a need to “accelerate structural reforms in the economy”. I would advise you to personally read these documents from cover to cover to really understand the conditions of the economy today. In short, there is a need to examine the details and not just gloss over the summaries of these reports, advice I would provide to any investor looking into Malaysia.

Fifth, you deftly talked about how your administration is cracking down on “crony capitalism”, “sweetheart deals” and that there would be no more “national follies kept going to stroke the ego of one man”. I especially like this one, where you say “No more treating national companies as though they were personal property” – brilliant. Let us hope then that the national agencies such as the Attorney General’s Chambers will lend its co-operation to any and all investigations including those from international bodies to assure us that 1MDB will not fall into such a category.

Sixth, you hailed SMEs as the “hallmarks” of your administration as they are the backbone of the economy. You also said that government policies are therefore meant to be business-friendly and pro small and medium enterprises (SMEs). However, the Price Control and Anti-Profiteering Act (PCAPA) is one such policy that is adversely affecting SMEs. The mechanism poses price ceilings on food and household goods sold at mamak and even small sundry shops. The mechanism to calculate the “right” price is so complicated that some shops have just shut down altogether because they could not afford to pay the fine. There are numerous other examples of regulations that are in fact making it very difficult for the business community to operate, which have been raised regularly at public forums but seemingly in vain.

Finally, Sir, with all due respect, your speech was peppered with many political references, many of which were obviously targeted at a specific individual. I am sure you made your point loud and clear. However, with all due respect, this may have been better said at a platform hosted by your political party – or perhaps out on the road when speaking to your electorate. To have these words uttered at a formal international investment conference may have been considered out of place. Perhaps your speech at the next Invest Malaysia conference could be more carefully worded – for the sake of future investment into this country we both call home.

Tricia Yeoh,
IDEAS