America has every reason to celebrate the historic election of Barack Obama as President. It is important to remind ourselves again just how insurmountable the odds were against Obama when he decided to launch his presidential bid. Within his own Democratic Party, he has to secure nomination against what once assumed to be the Party’s natural choice – Hillary Clinton. Even after his party’s nomination, with the Democratic base deeply split, Barack has to face off against the candidate from Republican Party, traditionally, the party that has access to huge funds from businesses; a huge (some might say fanatical) religious base, and more critical, a party that tend to whip up religious and even racial overtones in order to secure the Presidency. What does a junior Senator who is of mixed blood, who is without political pedigree, has against McCain, an American war hero whose family has been in the service of the American Navy for generations?
Obama pulled of this momentous win because his campaign, as one political commentator put it so succinctly – was inclusive, engaging and empowering. He organized his support from the grassroots up. He uses the internet to reach out to young voters. Whereas the Republican Party continues to rely on big donors/businesses for funds, Obama democratize his campaign contribution receipts by actively seeking funds from everyone, whether $10 or $20, who yearned to see change through him. He dared Americans to embrace change, telling the young and old, the cynical and the apathetic, that they can restore the American dream by voting – that they have a role to play. Believed him they did – first time voters and the young came out in droves, braving long queues because they really believed they can make history by securing a better future for America and for themselves.
Obama’s closing statements in his victory speech, “…And where we are met with cynicism and doubts and those who tell us that we can't, we will respond with that timeless creed that sums up the spirit of a people: Yes, we can”. Doesn’t this remind us of our very own failed leadership who is always holding us back from embracing a truly united Malaysia, without regard to colour and race? A tarnished political entity that has no courage to overturn its ludicrous beliefs that 50 years after Independence and into the 21st century, we Malaysians are not ready to be Malaysians first, and our respective race, second?
It is thought that Malaysia ushered in a new era when for this first time in Malaysian politics we created a viable 2 party system after the March general election. Though it was a clear message to the ruling elite that Malaysians have found their voice, and that we have, and will, exercise our right as citizens to accord power only to those that uses them for the good of the country, alas, the ruling party continues to practice a divisive brand of politics. In his speech, Obama immediately reached out to those who had not voted for him, saying, “I will be your President too”. In contrast, the National Front is sidelining the PKR-ruled states, creating disunity within our own state borders, while trying to undermine the PKR by harping on the perceived racial/religious differences between its partners.
Meanwhile, the country slides into deep economic uncertainty. We are still waiting for judicial reforms; tougher legislation against corruption; lower crime rates. Changes we the people have been promised but yet to be delivered. We may have a change of leadership next year but great skepticism persists whether a PM-in-waiting whose name has been dragged into a sensational murder case and a questionable billion-dollar helicopter deal can effectively inspire change. While America may face a steep economic recession next year, it will be fighting with a sense of renewed purpose that in the midst of gloom, it can emerge with a bright future if they stand together, rallied on by an inclusive new President. For Malaysia, in 2009, we would most probably still be breathing in the same stale air of zany economic policies that encourages rent-seeking; backward politicians that still bicker how to divide a rapidly shrinking pie when other nations are busy expanding it; and the delusion that Malaysia is not ready for change simply because they themselves are not prepared to.
“We are ready for Change. We are one Nation, We are One People” so exclaimed the new US President-Elect. Malaysians are still waiting for a leader that has the courage to espouse this dream. Congratulations, America. You have once again given us hope and dared us to dream.
Wednesday, November 5, 2008
Monday, October 13, 2008
Minimum Wages and Foreign Labour in Malaysia
The argument for minimum wage is essentially a socialist one – the notion that there must be a government mandate that employers pay a statutory minimum wage, irregardless of the productivity levels or the skills set of a particular employee, runs counter to the free market mantra that the price of labour (i.e. wages) should be determined by market forces.
Dr. Toh (The case for a minimum wage, The Edge, October 13, 2008) did try to camouflage his support for minimum wage (and for the discontinuing of foreign labour usage) with free market arguments. I would like to state my disagreement with some of his points.
The shift to greater automation in the firms’ production functions in our country has been hampered by the practice of government to allow the liberal import of unskilled or semi-skilled workers from overseas. This at once distorts market forces of supply and demand of labour in the labour market. Labour shortage is augmented by unlimited supply from overseas.
The above is a contradictory statement of sorts. The free movement of labour across borders is not a distortion of market forces. Labour shortage is. In an environment of labour shortage, wages are artificially raised without a corresponding increase in output, simply because there are insufficient labour supply. Why is labour different from say, from apples? If Malaysia is short of apples, should we simply bear with the high prices of apples? Why shouldn’t we import apples from countries with surplus stocks and then let the market decide on the price?
Labour shortage is augmented by unlimited supply from overseas.
Dr. Toh acknowledged that there is a labour shortage crisis in Malaysia. This shortage is most acute in the so-called 3D work; dirty, dangerous and demeaning. Most foreign labour are found in industries such as construction, manufacturing and agriculture, jobs which Malaysians shunned anyway in favour of better-paying and more pleasant occupations. If these labour shortages cannot be overcome by supply from within or without Malaysia, then what does Dr. Toh suggest we do? Let constructions sites grind to a halt?
Many countries have adopted a minimum wage policy, yet their competitiveness remains high.
Competitiveness will surely be eroded when a minimum wage is introduced, at least initially. The consulting firm Booz & Co conducted a survey of 66 multinationals with operations in Shanghai and found that 54% suggested that China has become less competitive due to rising labour costs. The reason is straightforward – labour costs are a significant portion of a manufacturer’s total costs. When labour costs go up, profit margins fall. Pricing power is weakened, and competitiveness eroded. Note that the manufacturing sector is still the largest contributor to Malaysia’s GDP in 2007. The introduction of a minimum wage will definitely adversely affect manufacturers’ competitiveness from a cost perspective.
The question is how existing players and new entrants will react to a new minimum wage. If manufacturers have the resources and initiative to modernize their plants, hence preserving their profit margins by using less workers, then competitiveness is maintained or may even improved. If new entrants are encouraged to move up the commercial food chain by venturing into higher value products or services where the inputs are biased towards capital and knowledge as opposed to labour, Malaysia’s economy will be boosted.
However, these are very big if’s. Those huge multinational companies with operations in Malaysia are most probably already employing the latest technologies there are available. It would not be inaccurate to say that these MNC’s set up shop here in Malaysia precisely because of its better skilled workers but relatively lower wages vs. the more developed countries. This is our competitive edge. A minimum wage which erodes this advantage could spur these companies to uproot and relocate to a cheaper country with cheaper labour costs, and they will be welcomed with open arms by these less-developed countries. Also, only well-capitalized firms will be able to upgrade their processes. Weaker ones will be run out of business as their costs spiral and they are unable to compete. As for many local manufacturing companies which are by nature labour-intensive, they have limited ability to create or purchase new automated techniques that mitigate their increased labour costs. Automation can only go so far, and the savings made by using a little less labour may not necessarily render net savings. The result is that both international and local manufacturers, both large and small, may relocate, reduce labour, or simply close down; too quickly for new entrants to come into the market to take its place. As one economist commented on the closure of thousands of factories in China due to rising labour costs – “it is easy to push people out, but harder to create new industries”. At the end of day, Malaysians are priced out of work, without any net gain to the economy.
Dr. Toh, in his closing statements, said “one good reason to legislate a minimum wage is the moral consideration of ensuring that our workers live dignified as human beings. The minimum amount must be sufficient to buy the means of sustenance.”
This proposition is fair. Workers are stakeholders of a company, and it is in the company’s interest to look after the welfare of its employees. However, Dr. Toh is over-emphasizing the influence of the private enterprise. It is dangerous to suggest that the private firm is responsible overall for the social welfare of its employees, and thereby must be mandated to compensate its staff a sum that is required for a minimum standard of living. Ultimately, the role of a private enterprise in ensuring a minimum standard of living for its employees is limited, since it has no influence over a myriad of factors that may cause the costs of living to go up. This is within the domain of the government. What happens if runaway inflation causes costs of living to go perpetually up? Does the private firm need to raise its minimum wage again and again to compensate for the shortfall? Where does it end? Until the firm goes bust and the employees have zero income?
Dr. Toh also mentioned that “many workers are not paid subsistence or living wage....these workers will not be motivated to work hard and not likely to have high productivity”.
Then the right market solution must to pay based on productivity, not mandate a minimum pay level that may not correspond to skill levels. The government, instead of mandating a blanket minimum wage across industries, should embark on a study of the profitability of each industry, and then link pay with productivity that is commensurate with the individual firms’ surplus. Paying a higher (minimum) wage to workers who should received less because of their persistent low productivity creates a disincentive to upgrade themselves, while it may penalize productive ones because the firm has to subsidize inefficient workers while economic output remains the same. A uniform minimum wage across different industries is likely to be damaging to those that are barely surviving and the end result is both good and weak workers are thrown out of work.
Minimum wages is a market distortion. Obstructing movement of labour is also a market distortion. Market distortions are rarely good for the economy. While there is a weak economic case for minimum wages, there could be a social argument for it. Dr. Toh must make the distinction clear, and understand that the role of the private enterprise in serving a social purpose is at best limited and at worst, even damaging to the worker that Dr. Toh intends to “protect”, when the private enterprise is unable to compete in its natural form in the face of various market distortions that Dr. Toh is advocating for.
Dr. Toh (The case for a minimum wage, The Edge, October 13, 2008) did try to camouflage his support for minimum wage (and for the discontinuing of foreign labour usage) with free market arguments. I would like to state my disagreement with some of his points.
The shift to greater automation in the firms’ production functions in our country has been hampered by the practice of government to allow the liberal import of unskilled or semi-skilled workers from overseas. This at once distorts market forces of supply and demand of labour in the labour market. Labour shortage is augmented by unlimited supply from overseas.
The above is a contradictory statement of sorts. The free movement of labour across borders is not a distortion of market forces. Labour shortage is. In an environment of labour shortage, wages are artificially raised without a corresponding increase in output, simply because there are insufficient labour supply. Why is labour different from say, from apples? If Malaysia is short of apples, should we simply bear with the high prices of apples? Why shouldn’t we import apples from countries with surplus stocks and then let the market decide on the price?
Labour shortage is augmented by unlimited supply from overseas.
Dr. Toh acknowledged that there is a labour shortage crisis in Malaysia. This shortage is most acute in the so-called 3D work; dirty, dangerous and demeaning. Most foreign labour are found in industries such as construction, manufacturing and agriculture, jobs which Malaysians shunned anyway in favour of better-paying and more pleasant occupations. If these labour shortages cannot be overcome by supply from within or without Malaysia, then what does Dr. Toh suggest we do? Let constructions sites grind to a halt?
Many countries have adopted a minimum wage policy, yet their competitiveness remains high.
Competitiveness will surely be eroded when a minimum wage is introduced, at least initially. The consulting firm Booz & Co conducted a survey of 66 multinationals with operations in Shanghai and found that 54% suggested that China has become less competitive due to rising labour costs. The reason is straightforward – labour costs are a significant portion of a manufacturer’s total costs. When labour costs go up, profit margins fall. Pricing power is weakened, and competitiveness eroded. Note that the manufacturing sector is still the largest contributor to Malaysia’s GDP in 2007. The introduction of a minimum wage will definitely adversely affect manufacturers’ competitiveness from a cost perspective.
The question is how existing players and new entrants will react to a new minimum wage. If manufacturers have the resources and initiative to modernize their plants, hence preserving their profit margins by using less workers, then competitiveness is maintained or may even improved. If new entrants are encouraged to move up the commercial food chain by venturing into higher value products or services where the inputs are biased towards capital and knowledge as opposed to labour, Malaysia’s economy will be boosted.
However, these are very big if’s. Those huge multinational companies with operations in Malaysia are most probably already employing the latest technologies there are available. It would not be inaccurate to say that these MNC’s set up shop here in Malaysia precisely because of its better skilled workers but relatively lower wages vs. the more developed countries. This is our competitive edge. A minimum wage which erodes this advantage could spur these companies to uproot and relocate to a cheaper country with cheaper labour costs, and they will be welcomed with open arms by these less-developed countries. Also, only well-capitalized firms will be able to upgrade their processes. Weaker ones will be run out of business as their costs spiral and they are unable to compete. As for many local manufacturing companies which are by nature labour-intensive, they have limited ability to create or purchase new automated techniques that mitigate their increased labour costs. Automation can only go so far, and the savings made by using a little less labour may not necessarily render net savings. The result is that both international and local manufacturers, both large and small, may relocate, reduce labour, or simply close down; too quickly for new entrants to come into the market to take its place. As one economist commented on the closure of thousands of factories in China due to rising labour costs – “it is easy to push people out, but harder to create new industries”. At the end of day, Malaysians are priced out of work, without any net gain to the economy.
Dr. Toh, in his closing statements, said “one good reason to legislate a minimum wage is the moral consideration of ensuring that our workers live dignified as human beings. The minimum amount must be sufficient to buy the means of sustenance.”
This proposition is fair. Workers are stakeholders of a company, and it is in the company’s interest to look after the welfare of its employees. However, Dr. Toh is over-emphasizing the influence of the private enterprise. It is dangerous to suggest that the private firm is responsible overall for the social welfare of its employees, and thereby must be mandated to compensate its staff a sum that is required for a minimum standard of living. Ultimately, the role of a private enterprise in ensuring a minimum standard of living for its employees is limited, since it has no influence over a myriad of factors that may cause the costs of living to go up. This is within the domain of the government. What happens if runaway inflation causes costs of living to go perpetually up? Does the private firm need to raise its minimum wage again and again to compensate for the shortfall? Where does it end? Until the firm goes bust and the employees have zero income?
Dr. Toh also mentioned that “many workers are not paid subsistence or living wage....these workers will not be motivated to work hard and not likely to have high productivity”.
Then the right market solution must to pay based on productivity, not mandate a minimum pay level that may not correspond to skill levels. The government, instead of mandating a blanket minimum wage across industries, should embark on a study of the profitability of each industry, and then link pay with productivity that is commensurate with the individual firms’ surplus. Paying a higher (minimum) wage to workers who should received less because of their persistent low productivity creates a disincentive to upgrade themselves, while it may penalize productive ones because the firm has to subsidize inefficient workers while economic output remains the same. A uniform minimum wage across different industries is likely to be damaging to those that are barely surviving and the end result is both good and weak workers are thrown out of work.
Minimum wages is a market distortion. Obstructing movement of labour is also a market distortion. Market distortions are rarely good for the economy. While there is a weak economic case for minimum wages, there could be a social argument for it. Dr. Toh must make the distinction clear, and understand that the role of the private enterprise in serving a social purpose is at best limited and at worst, even damaging to the worker that Dr. Toh intends to “protect”, when the private enterprise is unable to compete in its natural form in the face of various market distortions that Dr. Toh is advocating for.
Saturday, September 13, 2008
Protection, not Detention....
Just a few weeks after PM Badawi told Malaysian journalists to do their job without fear, a young female reporter is arrested and detained for 24 hours before being released today. The reason for her arrest under ISA, according to the Home Minister, is for her own protection.
It is incredible that the Government can offer up such farcical explanation for the arrest. One can only draw 2 conclusions from this excuse given - either the government is totally clueless as to how absurb the explanation sounds OR it is a veiled message to the people that the ruling party has near totalitarian powers such that it need not give valid justifications for acting against its own citizens.
The ISA, by allowing the police to detain anyone swiftly and without due legal rights accorded to the detainee, should only be invoked under the most dire circumstances where the country's internal security is so compromised that without drastic and quick action, it will descend into utter chaos if the alleged perpetrator is allowed to hide behind the laws of the country while continuing his or her threat against national peace.
Such immense power should be exercised with great caution, what's more when it is used against one's own citizens. Sound-minded Malaysians must be wondering how is it that the Malaysia's peace can be so fragile, or that the Malaysia's legal system is so porous, such that three law-abiding citizens, has to be detained without trial.
It pains me to see the parents of Theresa Kok, who tearfully appealed to the authorities to disclose the whereabouts of their daughter. And mind you, Theresa is an elected Member of Parliament. She has denied any involvement in the allegations made by Selangor's former MB, and there she is, detained without any legal means to defend herself while the accuser is not even being investigated.
If the arrests are meant to project strength and control, it hasn't. Instead it smacked of desperation and despair.Any last ounce of goodwill that this current Badawi Administration has among the peace-loving, forward-looking Malaysians has just evaporated together with this unjustifiable ISA detentions.Come next elections, the party that has the courage to discard this archaic piece of legislation will win my vote; and I dare say, this is the same sentiment shared by millions of young Malaysians out there.
It is incredible that the Government can offer up such farcical explanation for the arrest. One can only draw 2 conclusions from this excuse given - either the government is totally clueless as to how absurb the explanation sounds OR it is a veiled message to the people that the ruling party has near totalitarian powers such that it need not give valid justifications for acting against its own citizens.
The ISA, by allowing the police to detain anyone swiftly and without due legal rights accorded to the detainee, should only be invoked under the most dire circumstances where the country's internal security is so compromised that without drastic and quick action, it will descend into utter chaos if the alleged perpetrator is allowed to hide behind the laws of the country while continuing his or her threat against national peace.
Such immense power should be exercised with great caution, what's more when it is used against one's own citizens. Sound-minded Malaysians must be wondering how is it that the Malaysia's peace can be so fragile, or that the Malaysia's legal system is so porous, such that three law-abiding citizens, has to be detained without trial.
It pains me to see the parents of Theresa Kok, who tearfully appealed to the authorities to disclose the whereabouts of their daughter. And mind you, Theresa is an elected Member of Parliament. She has denied any involvement in the allegations made by Selangor's former MB, and there she is, detained without any legal means to defend herself while the accuser is not even being investigated.
If the arrests are meant to project strength and control, it hasn't. Instead it smacked of desperation and despair.Any last ounce of goodwill that this current Badawi Administration has among the peace-loving, forward-looking Malaysians has just evaporated together with this unjustifiable ISA detentions.Come next elections, the party that has the courage to discard this archaic piece of legislation will win my vote; and I dare say, this is the same sentiment shared by millions of young Malaysians out there.
Monday, June 16, 2008
1-3 hours delay still considered "on-time" and of "5-star service"?
Air Asia today announced that in their efforts to offer a "5-star service" to passengers, any delay exceeding 3 hours from time of departure will mean affected passengers will receive compensation. This will come in the form of an e-gift voucher worth RM200. The e-voucher is part of its "On-time Guarantee" initiative.
Hmmm...the fuel increase must have really begun to affect airline service standards. Afterall, any delay under 3 hours is still considered "5-star" and "On-time"?!
Hmmm...the fuel increase must have really begun to affect airline service standards. Afterall, any delay under 3 hours is still considered "5-star" and "On-time"?!
Sunday, June 15, 2008
Wither the next generation
Our children face a bleak future. This is the result of the complacency and short-termism of our country’s leadership, whether past or present. We have squandered away precious resources and time, by embarking on one grandiose project after another, focussing narrowly on expensive infrastructures and monuments, while consistently neglecting the one resource that can maintain Malaysia’s place in the global economy – our human capital.
From our primary schools to public universities, standards have been falling for years. Our PM has been busy criss-crossing the country officially launching economic corridors here and there. Perhaps the PM should be visiting schools and universities to see how well our young generation will be able to cope when they enter the workforce. For all the multi-billion dollar super-corridors, which is basically just hardware, what good is it to have IT hubs, biotechnology facilities; R&D centres; when we cannot have competent and qualified professionals to work in them?
Education policies aren’t “sexy”. A comprehensive, well-thought out and laboriously implemented education blueprint might take years, even decades before its results became apparent. Hence, given the short attention span of the Malaysian public,politicians do not want to waste time outlining good education proposals when fiscal policies like tax cuts will generate instant popular support (hence votes). Furthermore, our government tends to go for the quick-fix, short cut solutions. It revels in instant success that takes little effort. Just throw money, loads of money at the problem and you will get a fast solution. Want a Malaysian in space? Why, just hold a Malaysian Idol-like Contest, spend millions to buy a ticket from the Russians, and voila!, after a couple of months, you have your very own Malaysian Angkasawan. Why bother spending the same millions (and years) in developing a space programme that actually sends qualified Malaysians into space? National unity failing? No problem! Cobble some training camps together, supply some crisp new uniforms, install some vigorous physical training programmes, and presto!, after 3 months, our National Servicemen will go back to their daily routine fully immersed with the spirit of Muhibah.
It is then not surprising that when it comes to our education policies, our government is guilty of not having a consistent, coherent and well-executed plan. The Education portfolio is often seen as a stepping stone to a higher office. As a result, every Education Minister that comes in tends to wants to stamp his mark by introducing new ideas, which is then hastily implemented, often discarding the previous’ structure, both good and bad. Substance does not matter here– what matters is we have something new. A case in point – we are still debating whether teaching Science and Mathematics in English is a viable idea.
In an article in the Edge, it stated that a 2007 World Bank report reaffirms the poor standards of our public universities. Our primary and secondary schools can’t be that much better off. The report went on to say that Malaysia would lose its competitive edge if it fails to produce a world class education system to propel the country into an innovative economy. Already, Malaysia’s strength in manufacturing is fast eroded by countries such as China who have vast supply of labour who are gaining in sophistication. In the services sector too, other developing countries has been furiously pouring in billions to upgrade their knowledge-based economy, and at the same time engaging the best brains to develop their future scientists.
So where does that leave us? Not only have Malaysia failed to carve out a niche to replace its waning dominance in manufacturing and to an extent services, our future generations of local graduates are ill-equipped with the creativity and knowledge in order to compete with the rest of the world. Because our manufacturing and services sector has no clear advantage over other countries, this can only mean our graduates will end up with jobs that are easily replaceable in other parts of the world. This in turn means the jobs available to our less-than-competent graduates will most likely offer remunerations that reflect its commoditized nature.
Parents of young children have not much choice. Those who can afford it will likely enrol their kids in private schools. Many of the young professionals today will no doubt do whatever they can to ensure their offsprings will be able to enter into foreign universities in the future, in order that they can secure a globally-recognized education that will give them that extra edge in getting good paying jobs. And where will these jobs come from? At this rate, no one will be putting their money on Malaysia. So we have a vicious circle – the Malaysian economy is stuck in the 20th century because our education system could not produce sufficient scientists, engineers and finance wizards who can transform it to a knowledge-based economy, whilst those with the knowledge will most likely offer their services to other countries because they could not find high-value employment back home. In the meantime, our neighbours have leapfrogged us, with our best brains contributing to their advancements.
How about parents who have no choice but to send their children to government schools? They can only pray for a miracle that somehow the standard of teaching improves; that the government appoints school administrators based on competence, not political obedience; that the entire education system is predicated on merit; that deserving students are given the means and support all the way from primary school to university to pursue their dreams.
If the government continues in its slumber by its fixation on billion-dollar infrastructures, and ignore the crucial need to revamp our education system now, our children will suffer the consequences of low-paying jobs in a less-than-competitive economy in the future. Coming at a time when we are running out of oil and high inflation looks to be a permanent fixture; our next generation will be the ones bearing the costs of our profligate and myopic ways. Low paying jobs in a less than dynamic economy; no more oil; high fuel and food prices – aren’t we condemning our next generation to a lifetime of meaningless slog, struggling to earn just enough to cover their bills with no light at the end of the tunnel? Can someone wake the government up now?
From our primary schools to public universities, standards have been falling for years. Our PM has been busy criss-crossing the country officially launching economic corridors here and there. Perhaps the PM should be visiting schools and universities to see how well our young generation will be able to cope when they enter the workforce. For all the multi-billion dollar super-corridors, which is basically just hardware, what good is it to have IT hubs, biotechnology facilities; R&D centres; when we cannot have competent and qualified professionals to work in them?
Education policies aren’t “sexy”. A comprehensive, well-thought out and laboriously implemented education blueprint might take years, even decades before its results became apparent. Hence, given the short attention span of the Malaysian public,politicians do not want to waste time outlining good education proposals when fiscal policies like tax cuts will generate instant popular support (hence votes). Furthermore, our government tends to go for the quick-fix, short cut solutions. It revels in instant success that takes little effort. Just throw money, loads of money at the problem and you will get a fast solution. Want a Malaysian in space? Why, just hold a Malaysian Idol-like Contest, spend millions to buy a ticket from the Russians, and voila!, after a couple of months, you have your very own Malaysian Angkasawan. Why bother spending the same millions (and years) in developing a space programme that actually sends qualified Malaysians into space? National unity failing? No problem! Cobble some training camps together, supply some crisp new uniforms, install some vigorous physical training programmes, and presto!, after 3 months, our National Servicemen will go back to their daily routine fully immersed with the spirit of Muhibah.
It is then not surprising that when it comes to our education policies, our government is guilty of not having a consistent, coherent and well-executed plan. The Education portfolio is often seen as a stepping stone to a higher office. As a result, every Education Minister that comes in tends to wants to stamp his mark by introducing new ideas, which is then hastily implemented, often discarding the previous’ structure, both good and bad. Substance does not matter here– what matters is we have something new. A case in point – we are still debating whether teaching Science and Mathematics in English is a viable idea.
In an article in the Edge, it stated that a 2007 World Bank report reaffirms the poor standards of our public universities. Our primary and secondary schools can’t be that much better off. The report went on to say that Malaysia would lose its competitive edge if it fails to produce a world class education system to propel the country into an innovative economy. Already, Malaysia’s strength in manufacturing is fast eroded by countries such as China who have vast supply of labour who are gaining in sophistication. In the services sector too, other developing countries has been furiously pouring in billions to upgrade their knowledge-based economy, and at the same time engaging the best brains to develop their future scientists.
So where does that leave us? Not only have Malaysia failed to carve out a niche to replace its waning dominance in manufacturing and to an extent services, our future generations of local graduates are ill-equipped with the creativity and knowledge in order to compete with the rest of the world. Because our manufacturing and services sector has no clear advantage over other countries, this can only mean our graduates will end up with jobs that are easily replaceable in other parts of the world. This in turn means the jobs available to our less-than-competent graduates will most likely offer remunerations that reflect its commoditized nature.
Parents of young children have not much choice. Those who can afford it will likely enrol their kids in private schools. Many of the young professionals today will no doubt do whatever they can to ensure their offsprings will be able to enter into foreign universities in the future, in order that they can secure a globally-recognized education that will give them that extra edge in getting good paying jobs. And where will these jobs come from? At this rate, no one will be putting their money on Malaysia. So we have a vicious circle – the Malaysian economy is stuck in the 20th century because our education system could not produce sufficient scientists, engineers and finance wizards who can transform it to a knowledge-based economy, whilst those with the knowledge will most likely offer their services to other countries because they could not find high-value employment back home. In the meantime, our neighbours have leapfrogged us, with our best brains contributing to their advancements.
How about parents who have no choice but to send their children to government schools? They can only pray for a miracle that somehow the standard of teaching improves; that the government appoints school administrators based on competence, not political obedience; that the entire education system is predicated on merit; that deserving students are given the means and support all the way from primary school to university to pursue their dreams.
If the government continues in its slumber by its fixation on billion-dollar infrastructures, and ignore the crucial need to revamp our education system now, our children will suffer the consequences of low-paying jobs in a less-than-competitive economy in the future. Coming at a time when we are running out of oil and high inflation looks to be a permanent fixture; our next generation will be the ones bearing the costs of our profligate and myopic ways. Low paying jobs in a less than dynamic economy; no more oil; high fuel and food prices – aren’t we condemning our next generation to a lifetime of meaningless slog, struggling to earn just enough to cover their bills with no light at the end of the tunnel? Can someone wake the government up now?
Wednesday, April 16, 2008
Stop Squandering the People's Money
Yet another study – a cost analysis to be exact – will be carried out to determine if it is viable to send a second Malaysian into outer space.
Why is it that that the government seemed so intent on wasting public funds on grandiose projects, at a time when costs of basic necessities such as food and fuel are hurting the people deeply? Just recently, the 2nd Finance Minister announced that the government may not be able to keep to its budget deficit target. Isn’t this a clear sign that expensive expenditures that do not yield any economic or tangible social returns should be discarded straightaway? Why are we looking towards space when we are facing a potential socio-economic crisis on the ground?
First of all, I have no idea what the learned Minister meant by a cost analysis. Does he not know the costs of a ticket into space? It must have cost the Malaysian government at least USD25m, since that was what other space tourists, e.g. American billionaire Charles Simonyi paid for his space trip on board the Russian craft Soyuz. The Minister must have meant a costs-benefit analysis. Perhaps he realized it is extremely difficult to quantify the benefits side of sending a Malaysian into space, hence omitting the most important consideration of the equation.
If there is indeed any commercial benefits of the space “programme”, there must be hundreds of companies lining up to sponsor the trip in return for some work carried out in space. The reality is that there is little commercial value that can be extracted from this space programme as there is no long-term plan being spelled out.
What about national pride? Can we put a price on this? A blog suggested that assuming the programme benefitted 3 million Malaysians, the cost per person is minimal, and the Angkasawan programme is worth every penny. Can the 3 million Malaysian please come forward and identify themselves?
There are much cheaper and effective ways to get young Malaysians to be interested in space. If we want to have a Malaysian in space, lets do it the proper (albeit the hard way). Let a Malaysian astronaut do more than simply strap himself into the spaceship when it takes off and unstrapped himself when it lands. We want a Malaysian that truly qualifies as an Astronaut. And is USD25m a small price to pay to for national prestige? Perhaps. However, when we still have pockets of poverty that will face severe hardships with rising food prices, it is time to turn our dreamy eyes away from space and focus on thousands of Malaysians who have trouble standing on their own two feet. Please Minister, junk the costs analysis and let common sense prevail.
Why is it that that the government seemed so intent on wasting public funds on grandiose projects, at a time when costs of basic necessities such as food and fuel are hurting the people deeply? Just recently, the 2nd Finance Minister announced that the government may not be able to keep to its budget deficit target. Isn’t this a clear sign that expensive expenditures that do not yield any economic or tangible social returns should be discarded straightaway? Why are we looking towards space when we are facing a potential socio-economic crisis on the ground?
First of all, I have no idea what the learned Minister meant by a cost analysis. Does he not know the costs of a ticket into space? It must have cost the Malaysian government at least USD25m, since that was what other space tourists, e.g. American billionaire Charles Simonyi paid for his space trip on board the Russian craft Soyuz. The Minister must have meant a costs-benefit analysis. Perhaps he realized it is extremely difficult to quantify the benefits side of sending a Malaysian into space, hence omitting the most important consideration of the equation.
If there is indeed any commercial benefits of the space “programme”, there must be hundreds of companies lining up to sponsor the trip in return for some work carried out in space. The reality is that there is little commercial value that can be extracted from this space programme as there is no long-term plan being spelled out.
What about national pride? Can we put a price on this? A blog suggested that assuming the programme benefitted 3 million Malaysians, the cost per person is minimal, and the Angkasawan programme is worth every penny. Can the 3 million Malaysian please come forward and identify themselves?
There are much cheaper and effective ways to get young Malaysians to be interested in space. If we want to have a Malaysian in space, lets do it the proper (albeit the hard way). Let a Malaysian astronaut do more than simply strap himself into the spaceship when it takes off and unstrapped himself when it lands. We want a Malaysian that truly qualifies as an Astronaut. And is USD25m a small price to pay to for national prestige? Perhaps. However, when we still have pockets of poverty that will face severe hardships with rising food prices, it is time to turn our dreamy eyes away from space and focus on thousands of Malaysians who have trouble standing on their own two feet. Please Minister, junk the costs analysis and let common sense prevail.
Tuesday, April 1, 2008
Open Tenders and Crazy Economics
I am very perplexed by a recent statement made by our Finance Minister. He opined that open tenders are not necessarily equitable, as it prevents financially-weak companies from competing. This is crazy economics.
A company with weak financial fundamentals (Company A) is likely to obtain a bank loan with higher interest rates (given the higher risk), vs. another one (Company B) with solid financial standing. This means for any project that Company A tenders for, it is going to demand a higher rate of return to compensate for its higher interest costs, which translates into higher tender price. This essentially means that it will lose to a lower bid by Company B if price was the only determining criteria.
Yet the Finance Minister is saying this is “unfair”. Is it fair to the tax-payers (if Company A was chosen) who will end up paying more, for say, a bridge, when some companies are willing to build it for less? The Government has no business to prop up companies by awarding plum projects to them, as it is akin to gambling with the rakyat’s money. What if Company A fails to deliver the project? Why take this risk when there are other companies who are far more reliable and cheaper?
Of course, there is nothing to prevent Company A from subcontracting the project to Company B, who can pull off the project with lower costs and hence price. Company A ends up with a profit by doing nothing, apart from securing the fat government tender. Company B gets the project it is fully qualified for in the first place, albeit from the “winning” bidder, and delivers. However, we, the tax-payers end up with a higher tab. Is this fair?
Ultimately, the Government, as custodians of the people’s money, must have the interests of the people in mind. So what if “only the strong and those with financial capacity” benefit from open tenders, if the people also benefits? After all, it is the rakyat that the Government is subservient to, not businesses. Equity to the People first, not companies!
A company with weak financial fundamentals (Company A) is likely to obtain a bank loan with higher interest rates (given the higher risk), vs. another one (Company B) with solid financial standing. This means for any project that Company A tenders for, it is going to demand a higher rate of return to compensate for its higher interest costs, which translates into higher tender price. This essentially means that it will lose to a lower bid by Company B if price was the only determining criteria.
Yet the Finance Minister is saying this is “unfair”. Is it fair to the tax-payers (if Company A was chosen) who will end up paying more, for say, a bridge, when some companies are willing to build it for less? The Government has no business to prop up companies by awarding plum projects to them, as it is akin to gambling with the rakyat’s money. What if Company A fails to deliver the project? Why take this risk when there are other companies who are far more reliable and cheaper?
Of course, there is nothing to prevent Company A from subcontracting the project to Company B, who can pull off the project with lower costs and hence price. Company A ends up with a profit by doing nothing, apart from securing the fat government tender. Company B gets the project it is fully qualified for in the first place, albeit from the “winning” bidder, and delivers. However, we, the tax-payers end up with a higher tab. Is this fair?
Ultimately, the Government, as custodians of the people’s money, must have the interests of the people in mind. So what if “only the strong and those with financial capacity” benefit from open tenders, if the people also benefits? After all, it is the rakyat that the Government is subservient to, not businesses. Equity to the People first, not companies!
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