The Economist: Malaysia Plays Catch Up

Malaysia is good at starting something but lack the will and impetus to follow through, a management sickness faced by many GLCs.

January 23rd 2014| 

Malaysia's new automotive policy aims to prepare the market for trade liberalisation, while easing the pain for its local carmakers.

In the second half of January, Malaysia's government unveiled the long-awaited revisions to its National Automotive Policy (NAP). The changes are designed to prepare domestic automakers for the imminent creation of the ten-member Asian Economic Community (AEC) and to carve out a role for the country in the regional automotive industry. However, the NAP 2014 also extends some of the protectionist measures that shield Malaysia's two indigenous manufacturers, Proton and Perodua, from international competition.

The most positive aspects of the new NAP 2014 aim to boost inward foreign investment by promoting Malaysia as a future hub for energy-efficient vehicles in the AEC. The new document broadens the definition of a green car, which is no longer tied either to a specific technology, such as petrol-electric hybrids or plug-in electric vehicles, or to engine size. The government will now start issuing licences to foreign producers to make small, energy efficient vehicles in Malaysia, hoping that such vehicles will also be exported elsewhere in the region.

The policy includes incentives and direct financing measuring M$2bn (US$600m). The ultimate goal is to boost exports of green vehicles to at least 200,000 units by 2020, with exports of automotive components reaching M$10bn at the same time. Instead of trying to compete in the mass car market, therefore, the Malaysian government is aiming to develop a market niche that could become a key driver of the automotive industry in coming years.

Yet Malaysia will face stiff regional competition even within this niche. Indonesia also has its low-cost green car programme, which is helping to attract foreign investment into the sector. Thailand has an eco-car programme, which aims to turn the country's into the ASEAN region’s main production hub for small, fuel-efficient city cars. It is also targeting green-car exports to countries outside the ASEAN trade block.

These two countries already outgun Malaysia in terms of both auto production and car exports. Thailand's policy of market liberalization has attracted investment from Japanese manufacturers and parts suppliers, which have built factories there over the past decade and a half. Vehicle production in Thailand is now around 2.5m a year, while Indonesia's output has reached 1.2m. Both those countries have also emerged as major regional vehicle exporters. Malaysia, meanwhile, produces fewer than 600,000 vehicles a year, with exports low.

History lessons

Part of the blame for this lies with Malaysia’s comparatively small market size and lower population. But part of the problem lies with its government's ambivalent attitude towards international trade in the auto industry. Malaysia's car industry was the brainchild of long-serving Prime Minister Dr. Mahathir Mohamad, who established Proton in the early 1980s, producing vehicles designed by Mitsubishi (Japan). The second car company, Perodua, emerged a decade later. The original NAP was published in 2006 with a goal of tilting the playing field in favour of domestic carmakers within a framework of controlled industry liberalisation. The first revision to the NAP was effected in 2009.

Initially, protectionist policies benefited the country’s automakers, making Malaysia a regional automotive leader in the 1990s. Without competition and trade opportunities to push the companies' development, however, the quality and technological sophistication of their vehicles suffered. Proton saw its market share drop sharply once it shifted to making proprietary vehicles. Perodua, in which Japan's Daihatsu owns a 20% stake, has been the market leader for over a decade, even though its vehicles are not competitive in international markets either.

Read more.

Was Bangkok Just the Start?

By Luke Hunt

The nature of terrorism is shifting. As a strategy favored by Islamic militants and separatists this nasty and virulent type of civilian-focused warfare had dominated the security landscape across Southeast Asia for much of the last decade. But as jihad groups likes Jemaah Islamiyah (JI) and Jamaah Ansharut Tauhid (JAT) are routed, and the likes of the Abu Sayyaf are contained, other outfits with foreign agendas are stepping into the breach.

Their differences were highlighted in two capitals over the last fortnight; in Jakarta where the last of the Bali Bombers has gone on trial, and in Bangkok where a trail of tragic errors had unwittingly led Thai police to an alleged Iranian plot to assassinate Israeli diplomats on Thai territory.

Speculation has firmed that the motive behind the botched plot – dubbed the Valentine’s Day Bombings – is linked to Israel’s well-publicized alleged assassinations of Iranian nuclear scientists.

Two people have been held in Bangkok in connection with the Bangkok blasts, a third is expected to be extradited from Malaysia and a fourth, a woman who rented the house, is believed to be in Tehran and is also wanted. Two more – one spotted leaving the house shortly before the blast – are also wanted.

All are linked to Hezbollah, the Lebanese-based Shiite paramilitary group whose benefactors include Iran and Syria, and are largely regarded as a terrorist outfit by the West.

Israel was quick to blame Iran for targeting its diplomatic staff in Thailand, as well as India and Georgia, after a series of bombs was detonated in the three countries over a 24 hour period.

The Bangkok plot was initially uncovered after a bomb was mistakenly detonated – blowing up part of the roof of a house the bombers had rented. According to some accounts, the pair fled, one attempting to hail a taxi that refused to stop. A grenade was tossed amid terrified onlookers.They fled and were eventually cornered by police. A bag of grenades was thrown, but it missed and bounced off a tree, exploded and blew the leg off one of the bombers. In all, five people, including the Iranian, were injured in three explosions.

Their fate was dictated solely because Thailand remains an open country and prides itself on ease of access for foreigners of all backgrounds – the Iranians simply found this an easy place to operate.

That style of planning contrasts sharply with the ideology and methods deployed by the likes of JI acolyte Omar Patek, who appeared before a Jakarta court amid claims he was a key strategist behind the Bali Bombings of 2002 that left more than 200 dead, and a string of church bombings in Indonesia on Christmas Eve nearly two years earlier.

However, Patek can’t be charged under terrorism laws introduced in 2003 because they aren’t retrospective. Instead, he has been charged with harboring terrorists and possessing ammunition for the purposes of launching a training camp in Aceh in 2010.

He has also been charged in connection with the church bombings in Jakarta, but his lawyers are arguing Patek isn’t the strategic mastermind behind JI that the prosecution alleges.

A verdict isn’t expected until June.Read more.

Also read:Malaysia’s Militant Headache

Year of ASEAN Opposition?

By Mong Palatino

Since last year, opposition parties across Southeast Asia have achieved varying degrees of electoral and political success.

The opposition Liberal Party dominated the 2010 Philippine elections and defeated the ruling party, which had been in power since 2001. The opposition victory reflected the unpopularity of former President Gloria Arroyo, who was accused of electoral fraud, human rights violations, corruption and plundering state coffers.

Recently, the opposition Pheu Thai Party defeated the ruling Democrat Party in Thailand, which led to the election of Yingluck Shinawatra – the country’s first female prime minister. Yingluck is the younger sister of former Prime Minister Thaksin Shinawatra, who was forced into exile after he was overthrown in a military coup in 2006. During the campaign, the opposition highlighted the culpability of the Democrat Party in the violent crackdown of anti-government protests last year, the worsening insurgency in the southern part of the country, the hostile relationship with Cambodia over a border dispute and the rising economic difficulties experienced by ordinary Thais.

Meanwhile, the People's Action Party (PAP) is still Singapore’s dominant political coalition after it won the most seats in the general election last May. Also, the candidate the party endorsed won last week’s presidential election. But the opposition scored some significant victories this year after it managed to win a few but strategic parliamentary seats. The PAP, which has dominated Singaporean politics since the late 1950s, also suffered its worst electoral performance this year, which according to analysts has permanently altered Singapore’s political landscape.

As in Singapore, the ruling coalition in Malaysia still has more than enough numbers in parliament, but the opposition is gaining ground. The disenchantment of the public with the country’s political leadership is also rising as seen in the massive participation of ordinary Malaysians in the Bersih democracy march in July. Organized in support of electoral reforms, the Bersih has since then evolved into an opposition political movement following the overreaction of the government, which violently dispersed the peaceful march. Bersih is expected to bring more votes to the opposition.

Moving on to Burma, many analysts were surprised to learn that opposition leader Aung San Suu Kyi has agreed to meet President Thein Sein of the military-controlled government. They are now asking if the global democracy icon has decided to work with the people who imprisoned her for more than two decades. But it could simply be an opposition tactic for outmanoeuvring the generals. Just a few weeks ago, Suu Kyi was allowed to travel to the north of the country for the first time since she regained her freedom, and she was warmly greeted by the people in the streets. The opposition hasn’t yet ditched the prospect of revolution, but it seems to be quietly maximizing the limited democratic space afforded to it by the Junta. Read more.

Can Yingluck End Thailand's Chaos?

Written by A. Lin Neumann

Tuesday, 05 July 2011

What was the point again? Had the elites been paying attention, a lot of this mess could have been avoided If the reactions to Sunday’s stunning electoral win by Yingluck Shinawatra in Thailand’s general elections hold, perhaps the nation has finally found a way out of the mess created by the 2006 military coup that ousted her older brother, Thaksin Shinawatra. All sides, it seems so far, are willing to accept the Puea Thai party’s majority win. “I can assure that the military has no desire to stray out of its assigned roles,” General Prawit Wongsuwan, a former army chief close to the leaders involved in the 2006 coup, told Reuters. “The army accepts the election results.” This is a very good thing. Regardless of what one thinks of Thaksin, the one-time populist strongman pulling the Puea Thai strings from his exile perch in Dubai, even the Thai army and the royalist insiders who orchestrated the coup must see the futility of trying to battle the popular tide by now. A tycoon with a dismal human rights record and little regard for the niceties of independent media, courts or regulatory bodies, Thaksin redrew the map of Thai politics with his direct populist appeal to a rural population that had long been taken for granted by the establishment in Bangkok. Having learned his craft building a virtual mobile phone monopoly that saw nearly every Thai chipping a few baht a day into his corporate coffers, Thaksin knew something about marketing. With his background as a police officer and a strong regional business family from the northern city of Chiang Mai, he also knew something about raw power, which he wielded with a heavy hand in shooting drug dealers and sending the army into the restive southern Muslim provinces to enforce a get-tough policy that backfired. However, his strong-arming, coupled with pro-poor policies, was — and is — popular. Just how popular the past five years have shown as the state and the Bangkok royalist elite have failed miserably to put together a government that could win a victory at the polls, instead using the courts and the army to get their way. Now, finally, it appears that everybody has decided to calm down and accept the Thaksin reality after five years of pointless chaos. If the Thais had simply gazed south at Indonesia, they might have arrived at this conclusion before they sent the tanks into the streets on Sept. 19, 2006. Indonesia is a country where ethnic, religious and geographic divisions are taken seriously and have frequently threatened to upend the fragile ties that bind the nation together. There were fierce battles to hold the country together after independence in 1949 and the anti-communist bloodletting that followed the failed — and still murky — coup against Sukarno in 1965 proved how hideously wrong things could go when the guns are unleashed. In the aftermath of the ouster of former dictator Suharto in 1998, the country quickly frayed at the edges. It seemed that whole regions might break away or the army might step in or Islamic terrorism might run out of control. The Indonesians held it together, though. They quickly instituted broad political reforms, held a series of successful elections that kept the military at bay and gradually became accepted as an island of stability in the region. The country is now the most successful democracy in Southeast Asia while Thailand’s political reputation has plummeted. By contrast, the Philippines — having had a successful and understandable extra-legal ouster of Ferdinand Marcos in 1986 — opted for no particularly good reason other than the anger of the Catholic church and the Makati elites to stage a de facto coup against Joseph Estrada in 2001. An inept, crooked and embarrassing drunk, Estrada was replaced for a decade by Gloria Macapagal Arroyo, whose government was accused of much more efficient corruption and massive human rights abuses. By contrast, Estrada would have been gone for good in 2004 had the elites kept their powder dry. That Thailand’s elites chose to follow the Philippine model and rid themselves of a presumed curse without the benefit of legal procedures sent the country into a tailspin that accomplished nothing. Now there are reports that the same people who organized the ouster of Thaksin are negotiating a way out of the dilemma and are willing to accept having his baby sister run the country. It seems possible Thaksin will be granted an amnesty from the corruption conviction that forced him to flee the country, and in exchange he and his allies will promise not to go after the Democrat Party and the army over the bloody crackdown on so-called Red Shirt protesters last year. Read more.

The Return Of Thaksin:Is Cambodia Cutting Its Nose To Spite Its Face

Hantu Laut

I got my 'Cambodian Daily' early this morning, sitting in a cafe close to where I stay.

The front page headline reads "Thaksin Arrives To Take Up Adviser Position."

Is Combodia cutting its nose to spite its face?

The Council of Ministers spokeman Phay Siphan said "As you understand Cambodia is open for everyone with no prejudice of background of politics.So we need everyone to help us get away from poverty."

Ha! Of all men, Thaksin?.Why not Bill Gates, Warren Buffett, Lee Kuan Yew or even better Malaysian former wiz kid, the adorable Anwar Ibrahim?

Thailand vowed to seek his extradition.Thaksin is wanted in Thailand on corruption conviction where he could face two years prison sentence.The Cambodian government said the charges against Thaksin are politically motivated. In all honesty, the Cambodian government was right, they were politically motivated by the ruling elites and the upper-class in Thailand.

This former Thai Premier is a wiz kid of some kind, he can turned enemies to become friends.Ironically, the diplomatic discord over the temples issue between Thailand and Cambodia started during his time as premier.

The effect of the diplomatic rupture between the two countries are already being felt here.There are sudden drop of people crossing the border from Thailand into Cambodia.Yesterday, not a single vehicle crossed the border.

It is unlikely that Thailand would close the border crossing in retaliation of Cambodia's political wrangle.

The caffe latte at the Fresco tastes much better this morning in spite of the bad news.

Is money the roots of all evil? Well, that brings me back to one of Abba's famous songs.

"Money, Money, Money." Part of the lyric goes,

Money, money, money
Must be funny
In the rich man's world
Money, money, money
Always sunny
In the rich man's world
Aha-ahaaa
All the things I could do
If I had a little money
It's a rich man's world

Thaksin has lots of it.

Wondering, which nation's passport he is using now?

Thaksin's New Family

11. November 2009 18:20

A somewhat bizarre (I don’t think that’s too strong a word here) and certainly provocative photo released by the Cambodian government today. Apparently it’s all happy families on the Cambodian side of the border. Thailand, meanwhile, issued an extradition request for former Thai Prime Minister Thaksin Shinawatra, which Cambodiaapparently has already rejected.

There’s an interesting analysis here of the implications of this for the already rapidly deteriorating Cambodia-Thailand ties, which the writer says may be passing the point of no return:

‘Even before landing in Phnom Penh, Thaksin's future inThailand looked particularly grim after Times Online published an interview quoting him as calling for a reform in the institution of monarchy. Thaksin strongly denied having criticised the monarchy, but his defiant touchdown inCambodia is unlikely to help his political predicament.’

Source:The Diplomat

A Thrashed Democracy

Hantu Laut

In 1984 I attended a business conference at Oxford University jointly organised by International Herald Tribune and Oxford Analytica.Discussions and dialogues were centered on the major economies of G7 countries and other emerging economies.My point of interest at that time was the emerging economies of South East Asian countries and the Middle East.

The Asean region was the fastest growing particularly Singapore,Malaysia and Thailand.The region was growing at an average of 7.5% annually.The other important aspect we were looking at, other than the economy, was political stability.For businesses wanting to invest in a foreign country, political stability and bottom line sit at the top of the list of priorities.

Surprisingly, strange as it may sound, the political situation in Thailand today was a correct prediction made at the time we had the conference, some twenty four years ago.

Below is part of the write-up on Thailand in the booklet given to participants of the conference:

"Thai politics are at a point of stalemate.Groups opposed to the continuing dominance of the army--the urban middle class and rural peasantry--are, if anything, more opposed to each other.

Thailand has the appearance of a systemically unstable state, and it is.But paradoxically, Thailand's chronic instability gives it a unique form of long term political stability--no matter how many times the regimes change, and there have been 14 coup attempts in the last 50 years, the ultimate effect, and the type of government, is invariably the same."

The recent civil disorder in Bangkok that pit protesters against the government shows how the urban business elites, the army, the police and elements in the palace were hand in glove to remove a democratically elected prime minister.

The police refused to take orders from the Prime Minister to deal with the protesters in accordance with the law, instead, allowed the People Alliance for Democracy (PAD) to break the law with impunity. The army, usually quick to react in a volatile situation only stood on the sidelines.The PAD protesters seized both airports in the city and virtually closed them down stranding hundreds of thousand of tourists.

The People Alliance for Democracy (PAD) which is predominantly urban and middle class have paralysed Thai politics and the government as part of their campaign to force the resignation of Prime Minister Somchai Wongsawat whom they accused of being a puppet of his brother in law and former Prime Minister Thaksin Shinawara who was forced to resign under allegations of corruption and abuse of power.Somchai and Thaksin draw their supports from the rural poor which gave both of them convincing victory at the polls.

The sit-in protests which lasted for more than a week which have paralysed the tourism industry finally came to an end with the court ordering the removal of Somchai as Prime Minister and some of his members of cabinet from the government.Somchai was banned from politics for 5 years and his party disbanded for reason of electoral fraud by an executive of the party.

The court had done a fine job of thrashing democracy by submitting to demands of a small group of business elites and the urban middle class and ignored the wishes of the majority, the rural poor.

The political chaos and protests were only confined to Bangkok while other parts of the country were not affected.

What next for Thailand? Will Somchai and his supporters respect the court decision or will there be even bigger political upheavel in the pipeline?

Somchai and Thaksin have strong grassroots in the rural areas.Would there be an agrarian revolution?

Note:For those who are interested to read the one on Malaysia click here.

Thailand:A Lesson To Be Learned ?

Hantu Laut

Anti-government protesters in Bangkok have blockaded the city airports leading to massive transport disruption and unbearable inconveniences to the public in general and tourists in particular.

Suvarnabhumi and Don Muang airports are under siege by anti-government protesters that paralysed flights in and out of Bangkok.

The protesters are demanding the resignation of duly elected Prime Minister Somchai Wongsawat alleging him to be a stooge of brother-in-law and former Prime Minister Thaksin Shinawatra.

The protest could not be termed peaceful as explosives had been used to cause damage and injury.Scores of people have been injured by the blasts.Police have refused to use force to disperse the crowd of protesters preferring negotiation instead.It's coming to a week now and no end is in sight that the protesters would budge from the impasse.Look like the army have to move in again.

It will have serious consequence on its tourism industry and economic development.No one would like to visit or invest in a country that is politically volatile.

Maybe, the Thai government should introduce the ISA ?

The question now is for those Malaysians who love to think demonstrations could solve problems for them to take a cue from what happened in Thailand.

Najib: Think Again !

Hantu Laut

The Deputy Prime Minister Najib Abdul Razak said the government has postponed its decision to ban sale of fuel to foreign registered cars within 50 miles radius of any border which was supposed to commence on Friday. It ultimately aims to increase the price of fuel throughout the country for foreign cars.

The reason for the postponement was not stated but it is safe to assume that the government are not sure how to go about doing it and the repercussions it may have on other industry with possible negative outflow on tourism.

The idea of having separate pumps for foreign cars would require additional capital expenditure and may lead to abuses by dishonest dealers who still can sell the cheaper fuel at their own price to foreign cars, cheaper than the fixed price for foreign cars but slightly more than the domestic price and pocket the difference in pricing.The Singaporeans and Thais would be happy to collaborate to get the cheaper fuel and make the dealer slightly richer. Do not underestimates Malaysians tendency and capacity for cheating and do not overestimates the effectiveness of our enforcement authorities. Most of the time the crooks got away.

Corruption, smuggling, abuse of power are just some of the examples of cheating in this country, which run into billions of ringgits every year.

A civil servant friend once told me how he is getting sick of politicians making high moral sounding speeches telling civil servants to discharge their duties honestly and not to be corrupted. He said "I get sick in the stomach every time I listen to those bastards telling us not to be corrupted as if we don't know that they are stealing billions from the nation like there is no tomorrow.They are just like fishes, when it starting to rot, it stinks at the head and than the rest of the body follows. They are the heads, we, the civil servants are the bodies, when they stinks, we stinks too". He said if the politicians are honest, uncorruptable and dedicated, majority of civil servants would follow suit.It's called leading by examples but, unfortunately, that has never been the case.

Would it be a wise move to have two-pricing system, one for domestic car and the other for foreign cars and what would be the saving in monetary term or would it have a negative impact on tourism in the country?

The top tourist arrivals by nationality in 2007 are shown below:

Singapore 10,492,692
Indonesia 1,804,535
Thailand 1,625,698
Brunei 1,172,154
China 689,293

(Source:Malaysia Hotel News)

Singaporeans are the biggest contributor to our tourism dollar.

Assuming 80% of Singaporeans,Thais and Bruneians entered the country by roads in cars,coaches and by trains.

There were 10,632,251 visitors in 2007. Assuming only 50% of the figure were true paying tourists,we would still have 5,316,125 visitors, majority of which probably came in their own cars. Let say we put a hypothetical figure of 3 persons to a car, we would have 1,772,041 cars entering the country and assuming they spend an average of RM300.00 on petrol per car, the total bill at current price would be RM532 million per year for foreign cars.Assuming the government increases the pump price for foreign cars by 100%, the total bill would be in the region of RM1.064 billions per year unsubsidised.

The total tourist receipts for 2007 was RM46.1 billions.It is safe to assume that 50-60% of the receipts were contributed mainly by Singaporeans,Thais and the other top arrivals.That's a whopping RM23 billion or more in tourism money, just losing 10% 0f it would mean RM2.3 billion gone, which is much more than the total revised fuel bill.

The net benefits to the government by increasing the price of petrol for foreign cars seemed negligible and not worth the effort.On the other hand it may loses the spin-offs from tourism if there were to be reduction of tourist arrivals due to the higher cost of fuel.

Government should not just look at what it pays directly out of the subsidy but should look at the bigger picture of the spin-offs from the industry.

To control and lessen the selling of subsidised fuel to foreign cars, the government should make it mandatory for all foreign cars entering the country to have minimum 3/4 tank of petrol.Any car that failed to comply with the ruling should be fined on the spot with a fixed amount set by the government.

With the 3/4 tank ruling those trying to buy cheap fuel at border towns would be weeded out and the bona fide tourists wouldn't be punished and the country continue to get its tourism spin-offs.

The Deputy Prime Minister Najib Abdul Razak said that Singaporeans are saying they don't mind paying the market rate.That's probably just lip service. The Singapore government for sure don't want the Singaporeans to come to Malaysia to spend their money here.Don't forget they have 3/4 tank ruling on Singapore cars leaving the island for Malaysia for many years now.

The best solution is to remove the entire subsidy on petrol and diesel and have one price structure.The government should only keep the subsidy on essential items such as cooking gas, rice and other essential foodstuffs for the sake of the poor and those in the low income bracket.

The RM56 billion subsidy spent on petrol and diesel is more than sufficient to improve the public transportation systems in the major cities and towns which will ease the burden of car ownership of those in the lower and middle income group.

Many Malaysians in that income group are living beyond their means, a culture infused during the Mahathir's era of making car ownership easily available to those who hardly can afford it, just to satisfy his industrialisation programme and show the world 'Malaysia Boleh' . Removing the subsidy on petrol and diesel and providing the people with better public transport would help those foolish Malaysians to get rid of the car they can ill afford.

Those in the lower income group spent over 50% of their monthly income to service the repayment,maintenance and repair of their cars with very little left for food, clothing and medical care. Some took to crime to supplement their income.

It is a complete fallacy to think that the poor and those in the lower income group are the one who benefited from the subsidy. If you don't own a car the price of petrol or diesel will have no impact on your daily lives other than the slight increase in the costs of living, the indirect results of the higher fuel cost.

The subsidised fuel are more benefiting to the upper middle class and wealthy Malaysians, those with their posh gas-guzzling monsters and multiple cars owners.

Maybe, now is the time to teach Malaysians how not to live with a subsidy mentality.

Footnote:
(For a small country, population of 380,000, the figure for Brunei seems odd.With that figure every Bruneian visited Malaysia an average of 3 times in 2007.The only plausible explanation, those are Bruneians going to and fro to the other side of Brunei separated by Limbang in Sarawak. They were all not tourists in the real sense, went through Malaysian Immigration in Sarawak, and were included in Malaysia's fallacious and sexed up statistics as tourists). See map below.