Malaysia Matters Podcast

Still ready as ever to stir the unease of Malaysians, Anwar has declared a new deadline for a shift in power. After utterly falling flat on his promise to be at the helm by September 16th, he now is demanding parliament convene an emergency session by Tuesday the 23rd so as to enable a vote of no confidence against Ahmad Badawi.  

The continued pressure from Anwar has led to a group of Malaysians to file a police report against him. The group of 15 to 25 individuals calling themselves ’Caring Public Which Loves Peace’ want to see police investigate Anwar for sedition for creating “… a near chaotic situation and panic among Malaysians. He posed a threat against the country’s economy and shook the confidence of foreign investors.”

The group claims that many Malaysian’s lives have been disrupted out of fear that the country could devolve into unrest, causing rushes for household goods and families keeping children home from school. Wan Abidin, a likely Umno member was reported as saying that the motivation of the report was not due to party bias but that ”We are all lodging this report against Anwar as concerned Malaysians who are worried for the stability and peace of the country.”"He is threatening the stability and peace of the country with his repeated allegations of a change in government,” said Abidin.

It has been apparent for some time that Anwar and his cohorts have been unable to get the backing needed to fulfill his promises. After many weeks promising that he would topple the government on the 16th, Anwar and his supporters backed of that statement last week. But now, after failing to come through, he is saying that he has had sufficient defectors to do the job all along, but that they will be named in “a few day’s time.”

We’ve previously discussed Anwar’s links to terrorism here at Malaysia Matters, but just what else can his campaign to destabilise the government be described as other than another form of terrorism? The Malaysian economy has been in decline since the March Opposition successes at the ballot box, and the more recent turbulence has caused investors to be yet again even more cautious “because of perceived political instability.” -Instability that Anwar has instigated for political gain. And having dug this hole, Anwar doesn’t inspire the confidence necessary to get Malaysia out having been unable to do so as Deputy Prime Minister and Finance Minister during the 1997 economic crisis.  

What is behind this disregard for the well-being of the country Anwar claims himself fit to lead? Anwar has been able to play down the case against him for sodomy and it is becoming clear that in his perverse and selfish see-saw of promises turned lies, the dominate motivation is his own ambition, and the casualty is Malaysia itself.

It is interesting to note that a couple of Anwar’s victories this year also mark points of downward spiral in the Malaysian economy. 

… the cost of insuring Malaysian bonds against default has risen sharply since Anwar’s coalition took a over a third of the seats in Malaysia’s election in March, increasing political risk. The 5-year CDS stood at 140.96 basis points on Monday, up from 91.85 on March 7, the day before the election.

That means it costs almost $141,000 to insure $10 million of Malaysian bonds against default.

According to Bank Negara’s latest statistics, some US$1.1bn (about RM3.8bn) of foreign funds exited from the country during the period Aug 15-29.

The exodus of foreign funds have plagued the weakening ringgit. Besides, a stronger greenback has also contributed to the departure of foreign funds.

Since the dollar began its upward trend in late July, the ringgit has been steadily on the slide. With the local currency going downhill, coupled with the lacklustre performances of the local markets, it is natural for profit-minded foreign investors to move their money elsewhere.

The ringgit has depreciated by about 6% since late July, from RM3.25 to RM3.45 to the dollar, with short-term prospects less than optimistic.

The highly unpredictable domestic politics and sluggish growth have gloomed the outlook of local markets among foreign investors, while the central bank’s decision not to increase the interest rates in late July has further consolidated their determination to withdraw from the country.

As an uncertain financial climate weighs on the US economy, appreciation for the significant bearing it has on the well-being of Malaysia’s economy is gaining attention in the press.

Shankaran Nambiar, writing for the Star, points out that, aside from the strain on the economy resulting from home-grown problems, that “shock waves” emanating from the US have a big impact on the Malaysian situation.

He points to data from the US dot-Com collapse in 2001 showing that the Malaysian growth rate slid to 0.5% In the meantime, with the US the largest destination for exports at 16% of the total, and with a substantial portion of the 15% that goes directly to Singapore eventually ending up in the US, a slowdown in US importation due to a shaky economic footing will mean a downturn for Malaysia as well. 

Nambiar points to milestones in making his case.

There was a double whammy June and July. After losing hundreds of thousands of US jobs in the first half of 2008 and with the rate of inflation at its highest in 17 years in June, the July IndyMac failure and Fannie and Freddie bailout underscored the enormity of the 2007 mortgage crisis, the full effects of which likely not yet have been felt.

With some reports that more than a million US citizens have been foreclosed upon.

In late February, Nouriel Roubini, in a written testimony to the House of Representatives’ Financial Services Committee, claimed that the US economy was at risk of a systemic financial meltdown. Roubini, a professor at the Stern School of Business, New York University, presented eight reasons why he thought a financial meltdown could not be avoided.

Structurally, the US economy has not been on solid ground for some time now. Its budget deficit has been rising, and now amounts to about US$357bil. It has a current account deficit of about 5.5% of gross domestic product, which declined from a deficit that stood at about 7%, a few years ago.

By many accounts worst is not over for the US economy. In addition to falling consumer confidence, high inflation, and reduced demand from firms, the US dollar is expected to drop further. The dollar, which has already dropped by 21% against the currencies of its major trading partners, is expected to drop further, reducing the purchasing capacity of Americans.

And with 60% of the economy reliant upon consumer purchase, that spells real trouble.

The result of all of this, according to Nambiar, is the likelihood that Malaysia will impose increasing interest rates in an attempt to stave off inflation in response to developments in the US, and thereby subsequently hamstring domestic investment. 

Malaysia must make a decision soon whether it will invest in nuclear power. 

Projecting that nuclear power plants would be needed by the year 2020, Dr MuhdNoor, Deputy Director of the Malaysian Nuclear Agency, has advocated such planing. [The] “longer Malaysia takes time for deciding upon the issue, the expenses to implement the option will also increase,” said Mr Noor during a present ation at the Asian Power Forum 2008 held in the country recently.

About 90% of Malaysia’s current energy is generated by coal or natural gas-fired plants.

Certainly, building a nuclear power plant will even now require a great deal of capital. “We are looking at about 10 billion ringgit (3.1 billion dollars) for a 1,000 MW plant,” Mohamad Zam Zam Jaafar, head of Tenaga’s nuclear energy task force.

But by dragging its feet, not only will Malaysia pay more later, it is already falling behind the energy curve even amongst its neighbors. In addition to existing reactors in the region, plans are underway for several brand new facilities:

Indonesia (4) 4,000 MW reactors online by 2016

Vietnam   (2) 2,000 MW reactors online by 2018

Thailand  (2) 2,000 MW reactors online by 2021

As the expense of resources burned in traditional plants continue to increase, Malaysia must be forward-thinking as it is in the national interest to have a plan underway to diversify sources of energy. Part of that diversification should be nuclear.

There are some important things to be discussed during this week’s meeting of ASEAN member nations, not the least of which is the ever-mounting concern over the welfare of member populations amidst increasing costs of commodities. With such a serious agenda, it would seem unlikely that the ongoing sensationalist headlines about opposition leader Anwar Ibrahim would prove much of a distraction amongst the ministerial delegations. 

But ASEAN just announced that it forecasts its declaration on human rights will be done within a year.  Perhaps the occasion will offer folks back home in Malaysia the impetus to seriously reflect upon institutions there.  For instance, what about the basic rights of those accused of a crime? To be sure, Anwar is making political hay of his situation, best as he can, but in all fairness, why, having since been jailed and bailed, has he been unable to see a copy of the police report?

Officials point out that they are following procedure to the letter, but why not just give Anwar the report? Amidst the hubbub, there have been reassurances that the government is doing just fine, but why the need for reassurances? To a certain extent, the government is helping fuel Anwar’s ongoing commentary.

Getting the easy stuff right and quickly out of the way helps show folks that the government is acting on the up and up; that it is transparent. And transparency never hurts, unless there is something to hide.

After posting bond following Wednesday night’s stay in jail and arrest by “20 balaclava-clad police commandos,” the latest headline in opposition leader Anwar Ibrahim’s ongoing scandal is his refusal to give police a DNA sample. He also has refused to be photographed by the police. ”They have seen all my private parts. Of course I refused to be photographed, it could be on YouTube very soon!”

Anwar has said the allegations made by Mohamad Saiful Bukhari Azlan, a 23-year-old former aide, are a government conspiracy to prevent him from seizing power after March elections where the opposition made major gains.

Anwar’s popularity as an underdog is running high in spite (or because) of being charged with sodomy for a second time. -Malaysia still has anti-sodomy laws on the books dating back to British colonial times that allow for caning and up to 20 years of jail time for acts of sodomy - even if both parties consent.

In the corresponding intrigue surrounding Anwar’s rival, Deputy Prime Minister Najib Razak, we await the next revelation to peculate up regarding accusation of his involvement in the death and mutilation of Shaariibuugiin Altantuyaa. (Murder is a capitol offense in Malaysia) 

And then of course Mr Balasubramaniam Perumal, the private detective that originally accused Najib, is still missing, along with his family. 

There is plenty more dirt to be dug up and flung before the next rainy season hits and it all turns to mud. That much at least is certain.

But while the headlines capture our attention, the real story here is the stratification of Malaysian society that is providing the undercurrents of support both for, and against Anwar.

Battlelines are drawn along ethnic division and for all of Malaysia’s attributes and potential greatness, it seems to lack an effective republican check that would ensure a protection of individuals and minorities - whether those minorities be ethnic, economic, or religious.

And so Malaysia is at a crossroads. Andy Mukherjee on bloomberg.com goes so far as to say that:

Malaysia ought to serve as a statutory warning to fast- growing Asian nations about the pointlessness of chasing the dream of Western-style prosperity while failing to build strong democratic institutions. It’s wishful thinking that the latter would miraculously appear when a threshold level of per-capita income is crossed.

The bottom line?

Without a broad conviction in respect for individual freedom, the institutions to guarantee the same, and effective leadership to accomplish this, Malaysian democracy threatens to continue rubbing itself raw.

…Palm oil, that is. Reddish gold. Sime Tea.

Ok, so the Jed Clampet thing doesn’t work all that well here. Forget about it.

But the importance of palm oil to the Malaysian economy shouldn’t be underestimated.

Malaysia is the world’s largest palm oil exporter. And, apparently, plantation owners have been successful enough at squeezing that stuff out (palm oil), that government officials have figured they ought to be able to squeeze a bit more themselves (taxes).  

Palm oil farmers with more than 40 hectars of land will get a new monthly bill that…

…will be at three percent of the profit made for every one metric tonne of FFB in plantations in Peninsular Malaysia and at 1.5 percent rate for plantations in Sabah and Sarawak.

Those that don’t comply with this tax will face steep penalties, including jail time.

About half a million people in Malaysia either grow the crop, or are connected to the industry. Malaysia is the word’s leading producer of the stuff which quite possibly may “have now surpassed soybean oil as the most widely produced vegetable oil in the world.”

So what’s the big deal with an additional few percent tax on profit?

True, there are reserves now, but indications point to demand for the product increasing ever more.

Under the weight of increasing food and fuel costs, leaders at the D8 are calling for a shift away from biofuel crops in favor of ensuring that sufficient quantities of food are produced.

Abdullah Badawi, the Malaysian prime minister, said the use of arable land for biofuels “should be stopped because such action will deepen the global food scarcity and further drive up food prices”.

“We must not allow the zeal for energy security to come into direct conflict with the basic need for food production,” he told the Developing Eight summit in Kuala Lumpur.

Data is beginning to support the contention that instead of attaining fuel security, the escalation in production of biofuels has instead been directly responsible for the increasing distortion of food prices as well as increases in the costs of fuel.

Last Friday the Guardian Newspaper printed a story on an as-yet unpublished World Bank report that indicates biofuel policy and production is responsible for a 75% increase in global fuel prices.

Rising food prices have pushed 100m people worldwide below the poverty line, estimates the World Bank, and have sparked riots from Bangladesh to Egypt. Government ministers here have described higher food and fuel prices as “the first real economic crisis of globalisation”.

“Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate,” says the report. The basket of food prices examined in the study rose by 140% between 2002 and this February. The report estimates that higher energy and fertiliser prices accounted for an increase of only 15%, while biofuels have been responsible for a 75% jump over that period.

It argues that production of biofuels has distorted food markets in three main ways. First, it has diverted grain away from food for fuel, with over a third of US corn now used to produce ethanol and about half of vegetable oils in the EU going towards the production of biodiesel. Second, farmers have been encouraged to set land aside for biofuel production. Third, it has sparked financial speculation in grains, driving prices up higher.

But from a much less empirical standpoint, shouldn’t the implications of intermingling food and fuel policies have seemed lacking in common sense right from the start?

After all, when I was a kid, my mother told me that it was bad manners to play with my food. I can only imagine that burning it would have horrified her.