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M. Bakri Musa

Seeing Malaysia My Way

My Photo
Location: Morgan Hill, California, United States

Malaysian-born Bakri Musa writes frequently on issues affecting his native land. His essays have appeared in the Far Eastern Economic Review, Asiaweek, International Herald Tribune, Education Quarterly, SIngapore's Straits Times, and The New Straits Times. His commentary has aired on National Public Radio's Marketplace. His regular column Seeing It My Way appears in Malaysiakini. Bakri is also a regular contributor to th eSun (Malaysia). He has previously written "The Malay Dilemma Revisited: Race Dynamics in Modern Malaysia" as well as "Malaysia in the Era of Globalization," "An Education System Worthy of Malaysia," "Seeing Malaysia My Way," and "With Love, From Malaysia." Bakri's day job (and frequently night time too!) is as a surgeon in private practice in Silicon Valley, California. He and his wife Karen live on a ranch in Morgan Hill. This website is updated twice a week on Sundays and Wednesdays at 5 PM California time.

Monday, March 26, 2018

Better And Cheaper Alternatives To GLCs

Better and Cheaper Alternatives To GLCs
M. Bakri Musa
The overall performance of these GLCs, especially with respect to their primary mission of spearheading Malay participation in commerce, is underwhelming. It is time to abandon this expensive and ineffective strategy.
These GLCs have acquired powerful constituencies. As such it would be a monumental political undertaking to dismantle these GLCs. If we were to have these GLCs then I would prefer that they be modeled after such American entities as the giant utility Tennessee Valley Authority (TVA), financing arm Export-Import (Ex-Im) Bank, or the space agency NASA. These companies undertake major and expensive ventures with their associated unquantifiable risks that cannot be borne by private entities. The need for GLCs in those areas can thus be better justified.
Consider NASA. The potential gains from its missions are long term, if at all realized. NASA’s research is literally out of this world with both the risks and costs unquantifiable and thus difficult to justify to shareholders. Yet we have seen the tangible benefits (aside from the moon landing and space exploration generally) in many seemingly unrelated fields such as manufacturing in zero gravity environments and elemental diets in clinical medicine.
Likewise with TVA; the tremendous boost in farm productivity and overall improvement in living conditions in America’s rural heartland owe much to the massive rural electrification programs made possible through TVA. Ex-Im Bank finances exports ranging from Boeing jets to Iowa wheat.
I would have also included Freddie Mac and Fannie Mae to the list of American GLCs except for their recent abysmal if not criminal performances. Both were instrumental in creating the housing bubble 2007 that triggered the worst economic crisis in America since the Great Depression. Theirs is a noble mission–to increase home ownership among the poor and minority groups long ignored by banks and mortgage companies.
Alas, noble mission alone is no guarantee of success or it being subverted. Both corporations aggressively pursued their mission and enjoyed robust profits. As it turned out those profits were used to lobby congressmen and regulators so the companies could skirt around existing regulations. In America, acts otherwise considered outright corruption and influence peddling in any other jurisdiction are viewed as legitimate pursuits of democratic rights! The excesses of Freddie Mac and Fannie Mae helped burst the American real estate bubble that in turn greased the slide into America’s worst recession.
There is however, one major difference with the way the Americans handled their GLC fiascoes as compared to Malaysians. Those debacles were subjected to intense public scrutiny through congressional hearings and criminal prosecutions. The shenanigans of the major culprits were exposed and they were held accountable. By contrast, to date Malaysians still do not know the extent, costs, or persons responsible for such spectacular failures like the Bank Bumiputra bankruptcy. As we do not examine our mistakes, we never learn from them. Malaysians are condemned to repeat them and at a much higher scale and cost. The Malaysian learning curve with respect to GLCs is depressingly flat. The current 1MDB debacle differs from previous ones only in scale, specifically the magnitude as well as audacity of the greed, and thus the cost.
The concept of GLC is legitimate. There are as many models as there are countries. I am supportive of China’s version. I do not mean the old communist state enterprises under Mao where they were known more for their bloated workforce, low productivity, and shoddy products. Those GLCs were meant to keep the masses employed, or more correctly, occupied.
The new GLCs of the post-Deng era have radically different missions, more along America’s TVA and NASA, to undertake massive commercial ventures that are beyond the capacity of China’s existing private sector. As China’s embrace of capitalism is recent, its private sector is not as yet robust; hence the need for GLCs. Chinese GLCs are also more focused, concentrating on three areas: civil engineering (including solar energy), high technology, and biotechnology.
The second mission of Chinese GLCs is to take on multinational corporations. China had to move quickly as they were entering the country at an exceptionally fast pace, thanks to Deng’s economic liberalization and the enticement of a huge untapped market. The company Lenovo that bought IBM’s personal computer unit is an example of this modern Chinese GLC.
With China allowing and encouraging foreign companies to enter its market, there was (still is) a stampede by them to establish beachheads. While the Chinese are supporting their GLCs either directly or indirectly, WTO rules notwithstanding, what they are not doing is limiting the entry of these foreign companies. Chinese GLCs are thus forced to compete with these multinationals.
For Malaysia, the obvious fields where it has a definite competitive advantage, and thus a good place to establish these GLCs, would be in such areas as rubber, palm oil, wood products, and our old-world rainforest biodiversity. This would also be a way for our GLCs to expand the market for local products. Consider the potential for natural rubber. The biggest market is of course car tires. Here the competition is from synthetic rubber but with the price of oil ever rising, natural rubber could prove competitive. The niche and highly profitable market however, would be in tires for jet planes, earth-moving equipment, and heavy trucks where the resilience of natural rubber is superior. Additionally, rubber is being used as shock absorbers for buildings in earthquake-prone areas.
Similarly there could be downstream manufacturing and marketing of palm oil and wood products. Currently FELDA is involved mainly in plantations with little downstream activities. At the moment it concentrates on selling raw palm oil in bulk to China and elsewhere instead of exporting the final products. Again we see this with lumber; we still export raw logs instead of the finished products. Engineered wood products are finding ever increasing use in construction. So far there is little interest in the private sector to engage in these R&D and manufacturing activities, hence the need for GLCs to spearhead them.
Malaysia should no longer export tin, rubber, or lumber; instead only their finished or manufactured products. The GLCs should focus on those activities. What Malaysian GLCs should not engage in is direct competition with established private sector industries. I see no merit in having a GLC in airlines, hotels, or hospitals. The Malaysian private sector is doing well in these arenas; there is no need for the government to interfere.
Sell off Malaysia Airlines. If AirAsia feels that Malaysia Airlines would complement it, then be prepared to pay a premium for that, lest risking losing Malaysia Airlines to another bidder. I have no problem if the airline were to be sold to Singapore Airlines, Air Timbuktu, or whoever else willing to pay the best price.
There is only one justification for GLCs like Malaysia Airlines and Pernas Hotels. That is, to serve as training grounds for Malays. Thus Malaysia Airlines should be training pilots, cabin crew, aircraft mechanics, and ground personnel in such numbers that it becomes a net supplier to other companies in the industry, regionally and globally. Similarly, those GLCs with hotel subsidiaries should be the practical training grounds in preparing Malays for the hospitality industry.
Back in the1960s and 70s, these GLCs functioned precisely as that. Many budding young Malays cut their executive teeth in these GLCs and were then poached by multinationals and other major employers. That contributed towards fulfilling the mission of increasing Bumiputra participation in the corporate sector. It was also a tacit recognition of the value of their experiences with these GLCs.
Today it would be a rare scenario to see any “poaching” of young executives from GLCs into the private sector. It is even rarer to see a GLC executive leaving the company to start his or her own enterprises. That more than anything else reflects the caliber and value of their experience, which in turn tells us volumes about these companies.
I see no merit in having GLCs in sectors already well represented by local players. That would be redundant and serve only to “crowd out” legitimate local enterprises.
Next: Transforming GLCs

Adapted from the author’s book, Liberating The Malay Mind, published by ZI Publications, Petaling Jaya, 2013. The second edition was released in January 2016.

Sunday, March 18, 2018

The Son Has Not Returned. A Surgeon In His Native Malaysia

The Son Has Not 

The Son Has Not Returned. A Surgeon In His Native Malaysia      Back Cover

When Malaysian-born and Canadian-trained surgeon Bakri Musa returned to Malaysia in the mid 1970s, it was to be a permanent move. The term “brain drain” had yet to be coined. 

Policymakers may expound on the dynamics of the brain drain but in the end what makes an individual leave his country is unique unto himself. To modify Tolstoy’s line, those who stay put are all alike; those who emigrate do so for their own special reasons.

The writer was blessed to have been spared dramatic escapes from tyrant rulers, close encounters with natural calamities, or surviving meaningless wars. Instead, the “push” factors chronicled here are the rigid bureaucracies, obstinate civil servants, and widespread incompetence. Those at least are remediable. More problematic is the pernicious culture of endemic corruption, religious fanaticism, and entrenched feudalism masked by a veneer of pseudo modernity.

During the 13-year period when the writer was away to be a surgeon, both he and Malaysia had changed, but in opposite directions. Parting ways early spared him many dashed hopes and bitter disappointments. As such the memories recalled here are for the most part fond, sweet, and pleasurable.  

Bakri Musa’s first memoir, Cast From The Herd:  Memories of a Matriarchal Malaysia, recalls his growing up in the world’s largest matrilineal society, the Minangkabau.

The title for this second memoir is a line from Sitor Situmorang’s poem, Si Anak Hilang (The Lost Son). 

Bakri Musa’s commentaries on Malaysian affairs have appeared in AsiaweekThe New York TimesInternational Herald Tribune, and The Far Eastern Economic Review, as well as on NPR’s “Marketplace” and The Voice of America. He has also given presentations at Stanford’s Shorenstein Asia-Pacific Research Center and the Woodrow Wilson Center for International Scholars, Washington DC. For the past 35 years he has been in private surgical practice in Silicon Valley, California.

Monday, March 12, 2018

Rationale For GLCs: Bypassing The Lumbering Civil Service

Rationale for GLCs:  Bypassing The Lumbering Civil Service
M. Bakri Musa

The third mission of GLCs–bypassing the lumbering civil service–is still valid if not more so with today’s service having deteriorated even further. The obvious solution would be to improve the civil service itself. However, an institution that has been left to ossify for decades could not and would not be changed overnight. Until that happens, if ever, you would still need a mechanism to bypass it.
The present favored path is for the government to “privatize” the particular government agency or function. This has been done to the railway, airport, water utilities, and the University of Malaya, among others. The rationale being that once these entities were freed of the micromanagement by meddling incompetent civil servants, those agencies would be liberated to chart their own course.
That at least is the theory or rationale. This being Malaysia however, the reality is far different. The problem was in the implementation. Consider the University of Malaya. Yes, it was “corporatized,” but its senior management and board of trustees remained the same. Nothing had changed except the management chart, paper flow, and of course the letterhead and logo.
In other instances the entity would be “corporatized” following a “buy-out” by senior management in cahoots with favored senior civil servants and political cronies. Those assets would be purposely and ridiculously underpriced. If the process had been above board, meaning, the assets had been competently appraised and put out to open bids, it would not have triggered much resentment. The government would also get the best price for its assets.
To make those deals even juicer, those buyers were generously funded by a GLC bank, often with no equity (cash) from the “investors.” If those new owners were competent enough and added value to the company, then perhaps those sweetheart deals could be justified. Alas far too often those new owners would strip the company down by selling off its assets. Then the government would be forced to buy back the company in order to protect consumers.
No surprise then that such “buy-outs” triggered much discontent especially among the workers who had strived hard to build up their companies only to see them being commandeered by these politically-connected menenggek (carpetbagger) managers. Those buy-out maneuvers are nothing but barely concealed confiscation of prized state assets by political cronies, reminiscent of what happened to Russia in its early days after emerging from communism.
When Malaysia Airlines was privatized, there was an exodus of its senior pilots, especially Malays. They were fed up with the highhanded ways of its new owner, one Tajuddin Ramli. These pilots were from the original Malaysia-Singapore Airlines. Their patriotism made them choose to be with Malaysia Airlines even though they would have been much better off if they had opted for Singapore Airlines. Then this upstart Tajuddin who could not tell the difference between flaps and slats began ordering these experienced pilots around.
            There was yet another twist to this Malaysian brand of crony capitalism manifested by these GLCs. Its grossest manifestation was the National Feedlot Corporation tasked with producing beef for the country. The project was “awarded” to an untested company owned by a minister’s husband, together with a vast tract of land in Gemas as well as a quarter billion ringgit in soft loans. Astoundingly, there were no covenants of any sort attached to that massive line of credit. That husband’s first priority was to siphon off the money to buy for himself a few luxury condos in Singapore even before the first cow shed was built! Only the exposé by Rafizi Ramli, a chartered accountant and an opposition Member of Parliament, exposed the sly scheme.
            As for developing Bumiputra human capital, another goal for these “transformed” GLCs, only two have formal educational arms. Petronas has its Universiti Teknologi Petronas (UTP) with its architecturally award-winning campus in Tronoh, Perak, and Tenaga, its Universiti Tenaga Nasional (UNITEN).
The academic offerings at these two institutions are, as expected, heavy on the technical side. Their “university” label is misleading; they are more like polytechnics offering a narrow field of study. Both institutions lack the basic departments one expects of a university, like the humanities. Significantly, considering the critical need for professionals able to communicate well in English, both universities are also without a Department of English.
The absence of a liberal arts core means that their students have limited exposure to courses where they could exercise their critical thinking and develop their communication skills. The products of both institutions are less broadly-educated professionals, more narrowly-trained technicians. Malaysia needs those kinds of personnel, no mistaking that. However, they are more suited for maintenance work, not innovative thinking. These graduates are not likely to guide Malaysia along any new paths.
Khazanah, Petronas, and Tenaga Nasional all offer scholarships tenable abroad. While Khazanah and Petronas select the best students and send them to top universities, Tenaga is content with sending its “scholars” to Britain’s Brighton College, now “souped up” to be a “university.”
These GLCs have failed not only in their basic mission as business entities, that is, to generate profits, they have also not fulfilled their mandate with regards to the development of Bumiputra human capital or the spearheading of Malays in commerce.
Next:  Better And Cheaper Alternatives to GLCs

Adapted from the author’s book, Liberating The Malay Mind, published by ZI Publications, Petaling Jaya, 2013. The second edition was released in January 2016.