(Petaling Jaya, Thursday): Malaysia is in danger of being reduced from a first-rate nation near developed nation status into a third-class nation facing problems about providing basic needs of its people like clean air, piped water and basic foodstuffs because of complacency and sheer incompetence of government leaders and officials.
MPs will be failing in their duty if they do not focus on the fundamental question as to how Malaysia has suddenly been reduced from a first-class nation to a third-rate nation with food shortage and starvation in Sabah, water shortage crisis and haze in Malaysia and the persistent economic crisis with the KLSE CI falling by over 100 points since the third 1998 budget three weeks ago.
This morning, DAP MPs and State Assemblymen met the Works Minister, Datuk Seri S. Samy Vellu on the water shortage crisis in the country, particularly in the Klang Valley, where another 1.2 million people would be affected in a second water rationing programme.
We conveyed to the Minister the great dissatisfactions of the people at the failure of the authorities concerned to take contingency plans to avoid the water shortage crisis as there had been ample warnings in the past of such a crisis. Furthermore, the even greater dissatisfactions among the people at the inefficient and unjust rationing and distribution of water, causing great hardships and even sufferings of the people. Several people had died as a result of the rigours of the water shortage crisis and I do not know what is going to be the final toll of deaths before the end of the water shortage crisis - which might worsen in the next few months.
This morning I received this email about the water shortage crisis:
"It is almost one month since we last had water. Apparently only a few houses in taman bahagia, ceras, has on and off water supply. The rest have been low and dry because the water pressure is too weak to reach our homes.
"this simply means that we get no water - not even one drop - from our taps during the rationing exercise. We hear people complaining of irregular supply and failure to follow the announced schedules. But for us, the ration exercise is one big bull.
"I have been carrying water every day and doing our laundry at relatives all this time. this cannot go on like this.
"my complain is not simply because there is no water. I understand that this is a problem affecting everyone. My complain is how come some housing areas have no water at all, while others receive their supply irregularly while still others have been receiving running water throughout this whole … water crisis.
"It is bad enough that our government cannot manage the water supply effectively. It is unbelievable that they cannot even manage rationing during this water crisis.
"the way I see it, somebody has to do some jumping into some lakes if they have all not dried up yet."
I thank the Works Minister for his prompt action in directing a Ministry official to Taman Bahagia, Ceras to check on the water situation. There is an urgent need for the various water authorities and government agencies to ensure that there is a mechanism whereby it is possible for anyone to contact with regard to any complaints about the water shortage crisis, including unfair distribution of water, and for these complaints to be attended to immediately.
There is not only a water crisis, the haze crisis still persists in various parts of the country.
I am surprised that the Deputy Minister of Housing and Local Government Peter Chin Fah Kui could attack me in Parliament last week for raising the haze issue in Miri and for criticising the Government neglect of the people of Miri in the last two months.
Peter Chin asked how I could use an e-mail from someone who was not even a resident of Miri who had expressed his dissatisfaction about the haze in Miri and claimed that as MP for Miri, he had received several e-mails, telephone calls and faxes from the people of Miri expressing their gratitude to the Government for its efforts in overcoming the haze.
On the day the Peter Chin claimed that the people of Miri were very happy with the government’s efforts to tackle the haze disaster in Miri, the Miri airport had again to be closed for four hours from 8.30 a.m. to 12.30 p.m., cancelling more than a dozen outgoing flights, the schools were closed, and Air Pollution Index (API) for Miri had been over 500 for the previous week.
What is wrong with my producing in Parliament an email expressing grave concern about the problem of haze in Miri just because it was written by a Malaysian who is not from Miri but who experienced the Miri haze firsthand?
It is Peter Chin who should make public all the emails and faxes which he claim he had been flooded with from the people of Miri to express their gratitude and happiness at what the government authorities had done about haze, so as to ensure their authenticity.
I do not apologise for bringing up in Parliament the haze problem in Miri and Sabah. It is the Barisan Nasional MPs from Sarawak and Sabah who should apologise to their voters why they had failed to raise the haze problem in Parliament.
I had asked in Parliament why there had been no declaration of a state of emergency when the API in Miri had consistently exceeded the 500 mark, which the Federal Government had previously announced as "state-of-emergency" level. The answer I got in Parliament is that this was to avoid giving the nation a "bad image".
Isn’t this sacrificing the interests of the people of Miri, allegedly to protect the "good image" of the country so that events like the SUKOM in September would not be affected?
Are foreigners so ill-informed that they do not know haze has returned as a problem, not only in Miri, Sarawak, Sabah but in Peninsular Malaysia, just because the haze disaster is played down in the mass media and a state of emergency not declared, when it should be declared?
The people of Miri must be most shocked that their MP could stand up in Parliament to express their satisfaction, happiness and gratitude to the Federal and Sarawak State Governments for their handling of haze problem in Miri. Is the government prepared to conduct a public opinion poll among the people of Miri as to whether they are satisfied with the Federal and Sarawak State Government handling of the two-month long haze in Miri?
As if the water shortage crisis and the haze disaster were not enough, there is now food shortages and starvation in Sabah as a result of the prolonged drought. The Sabah State Government is talking about mass evacuation of drought victims from remote areas to relief centres where they will be given proper food, medicine, water and other necessities, if the rains fail to come in May as predicted earlier.
Sabah State Social Services Minister Datuk Raymond Tan has admitted that at least six districts in Sabah are short of food and the number of people affected has yet to be determined. He said the districts where farming families have run out of rice were Kudat, Kota Maraudu, Tuaran, Papar, Keningau and Sipitang having lost their padi crops whether as a result of drought or fires.
There is the reference of 2,300 drought stricken victims in Ulu Bengkoka, but how many people are suffering from starvation?
I am shocked that although the Sabah state government has figures on the number of people facing food shortages, it is not prepared to release the figures to the public. This is a most reprehensible and irresponsible attitude which would deprive the victims of the drought and starvation crisis all the help they needed. I call on the Government to declare a state of emergency to deal with the starvation, food shortage, water shortage and haze in Sabah and the Federal Government should set up a special task force to render all possible assistance in the matter.
On the economic front, although the Deputy Prime Minister, Datuk Seri Anwar Ibrahim said in Washington that the worst is over for Malaysia’s economy and that the country is recovering, the Malaysian economy has not responded positively to the third 1998 Budget presented by Anwar in Parliament on March 25.
In fact, the KLSE CI had fallen by over 100 points since Anwar’s third 1998 budget three weeks ago, from 731.39 points on March 24 to 622.78 at the close of trading this morning.
The Prime Minister, Datuk Seri Dr. Mahathir Mohamad should review whether his recent speeches are again causing negative sentiments in the market at a time when the priority of the government should be to restore investor confidence.
In his speech on Tuesday, Mahathir returned to his old theme in July last year putting the whole blame of the economic crisis on currency speculators, in particular George Soros.
Speaking at the Seminar on Virtual Reality at the Mines Exhibition Centre organised by the Universiti Malaysia Sarawak, Mahathir virtually blamed the Asian economic crisis on "virtual reality" in the international market place, citing currency trading as an example, "where a trader can borrow millions of units of any currency without actually taking or handling the money" and which could impoverish whole countries and regions because of currency trading, in some cases by 400 per cent.
Mahathir is surely going against all good economic advice, whether in the Finance Ministry, Economic Planning Unit and the National Economic Action Council, when he persists after a period of quiescence to continue to make speeches which can only fortify general impression that there is a resurgence rather than an abandonment of the "denial syndrome" at the highest councils of economic policy-making in Malaysia in refusing to acknowledge the internal policy, systemic and structural weaknesses which are the bigger causes as to why Malaysia is facing the worst economic crisis since the Second World War.
The latest International Monetary Fund publication on the 1998 World Economic Outlook, for instance, conceded that several factors had contributed to the Asian economic crisis, both domestic and external - but mainly domestic.
This is what the IMF 1998 World Economic Outlook said on the Asian Crisis:
"The economies of east Asia at the center of the recent crisis have been some of the most successful emerging market countries in terms of growth and gains in living standards. With generally prudent fiscal policies and higher private saving rates, these countries had become a model for many others. That this region might become embroiled in one of the worst financial crises in the postwar period was hardly ever considered - within or outside the region - a realistic possibility. What went wrong? Part of the answer seems to be that these countries became victims of their own success. This success had led domestic and foreign investors to underestimate the countries’ economic weaknesses. It had also, partly because of the large-scale financial inflows that it encouraged, increased the demands on policies and institutions, especially but not only in the financial sector; and policies and institutions had not kept pace. The fundamental policy shortcomings and their ramifications were fully revealed only as the crisis deepened. Past success may also have contributed to a tendency toward denial by policymakers of the need for action when problems first became apparent."
In the last two days, after Mahathir "Virtual Reality" speech, the KLSE CI fell by 22.43 points, and another 22 points at the close of trading this morning.
There are of course other factors apart from Mahathir’s speech for the crash in the KLSE CI as for instance, fears that another 70 companies risked to be dissolved after more companies, like the Wembley Industries Holdings, the SCK Group Bhd and Bescorp Industries Bhd. face liquidation proceedings.
However, Malaysian investors have a right to expect that the Prime Minister, after his adverse influence on market sentiments during the economic crisis last year - which he had publicly admitted - should be careful in his speeches and statements so as not to undo all the efforts the government had been doing to restore confidence. I therefore call on Mahathir not to make speeches which can only evoke negative sentiments in the market at a time when the priority of the government should be to restore investor confidence.
The Malaysian Government should respond to the latest International Monetary Fund (IMF) study that it hasn’t found compelling evidence that hedge funds take the lead in driving down currencies in the Asian financial and economic crisis.
The Malaysian Government, led by the Prime Minister had charged that currency speculation by hedge funds had caused economic havoc and wiped out decades of development in South East Asia and had asked the IMF to conduct a special study on the matter.
The IMF study on the role of hedge funds was summarized in the latest IMF World Economic Outlook 1998 released on Monday. It estimates that hedge fund capital (excluding "funds of funds" or hedge funds that invest only in other hedge funds) was in the neighbourhood of US$100 billion as of the third quarter of 1997. Of that, some US$25 billion was in the hands of the macro funds, which typically leverage their capital by borrowing by four to seven times.
Although these numbers are large, the hedge funds are relatively small operators compared with other institutional investors such as pension funds, mutual funds, insurance companies and commercial banks, which, in the mature markets alone, exceeds US$20 trillion. These other institutional investors are increasingly active in international markets.
The types of hedge funds that have been the target of attacks by Mahathir are the "macro funds", which bet on a certain direction they think national markets are going.
The IMF, however, found that macro funds aren’t the only ones playing that game. Multinational firms also routinely take positions in these markets to protect their large reserves of capital, so what the hedge funds do isn’t all that extraordinary except for their more relentless pursuit of profits, IMF officials say.
The IMF study concludes:
"The most important action policymakers can take to protect their economies against uncomfortable market movements is to avoid offering one-way bets in the form of inconsistent policies and insupportable currency pegs. They can also strengthen the ability of clearance, settlement, and payments systems to withstand asset-price volatility. And they can provide better information about government policy and private sector financial conditions in order to weaken the tendency for inadequately informed investors to ‘follow the herd’ and thereby magnify the repercussions of the positions taken by large institutional investors, among which hedge funds are only one category."
There are in fact grounds for concern that Malaysia, in refusing to completely shake out of the "denial syndrome" in the tenth month of the economic crisis and still resorting to simplistic explanations of the economic crisis, putting all or most of the blame on foreign speculators rather than address internal policy and structural faults and weaknesses, may risk being left behind when other economics worse-hit by the economic crisis come out of the economic slump.
With Malaysia less willing to impose tough measures like those demanded by the IMF in Thailand, Korea and Indonesia, and refusing to carry out wide-ranging political, economic and financial reforms, as still involved in mega-bailouts, would Malaysia run the risk of falling behind as an investment destination behind South Korea and Thailand which would come out much stronger and more dynamic with better long-term outlook as a result of fundamental structural reforms.
If Malaysia is to succeed in restoring investor confidence and emerge from the economic crisis, it is essential that the government honour its public undertaking that there would be no bail-out of troubled companies or individuals and no corporate restructurings. What we want is a bail-out of the nation and not bail-out of troubled companies or individuals, whether at public expense or at the expense of minority shareholders.
The Asian Wall Street Journal today in its front-page report on "Malaysian Airline System Faces a Big Restructuring" has again raised doubts about the government’s commitment of "No bail-outs, no corporate restructuring".
The AWSJ reported:
"In a plan likely to vigorously reignite the controversy over shareholder rights in Malaysia, the controlling shareholder of Malaysian Airline System Bhd. is proposing a restructuring.
"In the complex plan, Tan Sri Tajuddin Ramli essentially is proposing to borrow against the carrier’s aircraft to raise funds that would be used to settle personal debts, according to senior government officials and financial executives close to the plan."
The AWSJ reported that under the plan, Tan Sri Tajuddin, who is MAS’ executive chairman and controlling shareholder, proposes to sell MAS’s aircraft to a new company, to be called MAS Capital, which he would ultimatelyu control. MAS Capital would then lease the aircraft back to MAS. The new company would be incorporated in the financial centre of Labuan to take advantage of tax incentives.
The market reaction has been very negative regarding it as another bail-out like the UEM-Renong bail-out, where the interests of minority shareholders would be sacrificed and this is another reason for the sharp drop in the KLSE Composite Index today.
The MAS bail-out has to get the approval of the Minister for Finance and I would urge Anwar to honour his pledge that there would be "No bail-out, no corporate restructuring" and be mindful of adverse public reactions to previous bail-outs like UEM-Renong and those involving Sime Bank to bail out KUB Bhd, Bank Bumiputra and Konsortium Perkapalan Bhd. and Mirzan Mahathir.
There is also a report today that Tan Sri Ting Pek Khiing would be selling out his substantial 55.7 per cent stake in Ekran Bhd. which was the key player in the Bakun dam project in Sarawak.
The market is waiting and watching as to whether this would be another form of bail-out if the purchase price is substantially higher than the market price.
In this connection, the Finance Ministry should explain the progress of the discussions between the Finance Ministry and Ekran Bhd. over the RM700 million compensation claim by Ting Pek Khiing over the government take-over of Bakun. There is also a report today about the Bakun dam project which would have a bearing on the success on confidence-restoration exercise. The government should inform Parliament on what is the position on the suspended Bakun dam project.
Finally, the government should explain the position of the Employees’ Provident Fund in the Rashid Hussein Bhd. rescue of Sime Bank which requires up to RM2 billion to recapitalise Sime Bank.
I understand the latest position is for EPF to give a loan to Rashid Hussein Bhd. rather than to participate in equity and if so, what would be the interest of the loan, whether it would be for the ridiculously low interest rate of 8.75 per cent as in the RM2 billion EPF loan to Khazanah.
Would Petronas finally be involved in providing funds for Rashid Hussein Bhd. in the rescue of Sime Bank?