Category Archives: Ekonomi & Kewangan

Najib Should Focus On Managing The Economy, Not Witch-Hunting Pakatan Rakyat Leaders

Parti Keadilan Rakyat is appalled to discover the length that Prime Minister Dato’ Seri Najib Tun Razak had gone to push the Saudi Government for a probe on alleged Saudi’s funding of opposition parties in Malaysia, especially when he had not responded to mounting calls for an all-party probe on GFI (Global Financial Integrity) report that Malaysia’s illicit fund outflows reached USD291 billion (equivalent to RM888 billion) for the period 2000 to 2008.

The Prime Minister’s act of abusing a diplomatic channel to press for a probe against a democratically elected Leader of Opposition is scandalous enough, though not as shocking as his lackadaisical attitude towards the GFI report.

It is symptomatic of Umno/BN’s obsession with character assassination as the only way to meet political challenge. When challenged for a debate on Pakatan Rakyat’s Buku Jingga, the Prime Minister resorted to personal attacks. In the midst of widespread concerns of his administration’s ability to resuscitate private investments and stemming out the average annual illicit fund outflows of USD32 billion (equivalent to RM98 billion annually), we discover that he was more pre-occupied with personal probe on Dato’ Seri Anwar Ibrahim.

The GFI report demands a closer scrutiny especially when the method and data used are bona fide and globally accepted. The method is based on the World Bank Residual model which uses the change in external debt (through balance of payments data) to determine unrecorded capital leakages. These capital leakages are often caused by proceeds of bribery, theft, kickbacks and tax evasion. This model is universally accepted and it is unbecoming of a certain Deputy Minister of International Trade to question the veracity of the model. The data used in the model is available publicly and announced by Bank Negara Malaysia periodically.

In light of this, any Finance Minister would have been alarmed, especially when Bank Negara Malaysia’s own statistics show a persistent large negative “errors and omissions” since 2005. “Errors and omissions” in the Balance of Payments corresponds to a balancing figure to account for statistical inaccuracies and incomplete reporting of financial flows monitored by a central bank. A negative “errors and omissions” simply means that either the outflows have been underestimated (more funds leaving the country than officially reported) or the inflows have been overestimated (or a combination of both).

Since 2005, Malaysia has recorded a large negative “errors and omissions” in its Balance of Payment as follows:

 

Year

Negative “errors and omissions” in RM billion

2005

27.8

2006

27.4

2007

17.8

2008

29.9

2009

17.9

Source: Bank Negara Malaysia, November 2010

The total sum of probable underestimation of outflows reported by Bank Negara Malaysia in between 2005 and 2009 is RM120.8 billion – an official statistic from the Government of Malaysia that provides a degree of correlation to GFI report on the illicit fund outflows of the country.

Given the gravity of this, it is best that the Prime Minister concentrates on managing the country’s economy prudently and act promptly on alarming revelations contained in GFI report. He has no business going around abusing the diplomatic channel to undermine Pakatan Rakyat and Dato’ Seri Anwar Ibrahim.

Finally the table is turned around – Umno/BN’s accusation that Pakatan Rakyat utilises an international networking for political advantage now rings hollow in light of the Prime Minister’s own behaviour.

MOHD RAFIZI RAMLI

DIRECTOR OF STRATEGY

28 JANUARY 2011

Najib Patut Fokus Perbetulkan Ekonomi, Bukan Salahguna Kuasa Diplomatik Untuk Risik Pimpinan Pakatan Rakyat

Parti Keadilan Rakyat sangat mual dengan tingkahlaku Perdana Menteri Dato’ Seri Najib Tun Razak yang dilaporkan menekan Kerajaan Saudi untuk menyiasat tuduhan beliau bahawa Dato’ Seri Anwar Ibrahim dibiayai tokoh-tokoh Saudi, sedangkan sehingga sekarang Perdana Menteri masih membisu apabila berdepan dengan desakan pelbagai pihak supaya siasatan lanjut dibuat mengenai aliran keluar wang haram sebanyak RM888 billion antara tahun 2000 dan 2008 seperti dilaporkan GFI (Global Financial Integrity) baru-baru ini.

Walaupun tindakan Perdana Menteri yang menyalahgunakan saluran diplomatik untuk kepentingan peribadi itu mengejutkan rakyat, keengganan beliau menyiasat aliran keluar wang haram sebanyak RM888 billion itu saya kira lebih mencemaskan.

Umno/BN semakin taksub dengan jalan memfitnah dan menekan lawan sebagai satu-satunya cara berdepan dengan cabaran politik dari Pakatan Rakyat. Apabila dijemput berdebat mengenai Buku Jingga, Perdana Menteri menghamburkan serangan peribadi. Di kala kebimbangan rakyat mengenai kemampuannya menghidupkan semula pelaburan swasta dan mencegah aliran wang haram sebanyak RM98 billion setahun memuncak, Perdana Menteri nampaknya lebih sibuk menyalahgunakan saluran diplomatik untuk menjaga tepi kain Ketua Pembangkang.

Laporan GFI sememangnya perlu diberi perhatian berat kerana kaedah dan data yang digunakan adalah benar dan diterimapakai di seluruh dunia. Kaedahnya adalah berdasarkan model Bank Dunia yang merujuk kepada perubahan di dalam hutang luar negara (melalui data Imbangan Pembayaran negara) untuk menentukan ketirisan wang dan modal yang tidak dilaporkan mengikut undang-undang. Ketirisan wang dan modal ini disembunyikan dari pihak berkuasa kerana ia selalunya bersabit sumber rasuah, kecurian dan pengelakan cukai. Model ini diterimapakai di seluruh dunia, maka kenyataan seorang Timbalan Menteri Perdagangan Antarabangsa yang mempersoalkan kesahihan model ini menunjukkan kedangkalan beliau sendiri. Datanya pula adalah data rasmi yang diumumkan oleh Bank Negara Malaysia dari semasa ke semasa.

Oleh sebab itu, sepatutnya seorang Menteri Kewangan tidak akan tidur malam dengan pendedahan GFI itu, apatah lagi apabila statistik rasmi Bank Negara Malaysia sendiri menunjukkan angka negatif besar  “Kesilapan dan Ketinggalan” dalam Imbangan Pembayaran negara yang telah berlanjutan sejak tahun 2005.

Statistik “Kesilapan dan Ketinggalan” dalam Imbangan Pembayaran negara merujuk kepada angka pengimbang bagi mengambil kira anggaran statistik dan laporan aliran wang keluar masuk yang tidak dilaporkan sepenuhnya kepada Bank Negara Malaysia. Maka, angka negatif “Kesilapan dan Ketinggalan” bermaksud sama ada aliran wang tunai keluar yang dilaporkan adalah lebih rendah dari aliran wang tunai keluar yang sebenarnya berlaku; atau aliran wang tunai masuk adalah lebih tinggi dari yang sebenarnya masuk (atau gabungan kedua-duanya).

Sejak 2005, Malaysia telah mencatatkan angka negatif “Kesilapan dan Ketinggalan” yang besar di dalam Imbangan Pembayarannya seperti berikut:

Tahun

Angka negatif “Kesilapan dan Ketinggalan” dalam RM billion

2005

27.8

2006

27.4

2007

17.8

2008

29.9

2009

17.9

Sumber: Bank Negara Malaysia, November 2010

Jumlah keseluruhan kemungkinan aliran wang tunai keluar negara yang dilaporkan adalah lebih rendah dari yang sebenarnya berlaku bagi tahun 2005 hingga 2009 adalan RM120.8 billion seperti yang diakui oleh Bank Negara Malaysia sendiri. Statistik rasmi dari Kerajaan Malaysia ini selari dengan pendedahan laporan GFI mengenai jumlah aliran keluar wang haram yang mencecah puluhan billion ringgit setiap tahun.

Justeru, adalah lebih baik sekiranya Perdana Menteri menumpukan tenaganya memperbetulkan ekonomi negara dengan berbelanja secara berhemah dan bertindak segera ke atas pendedahan yang dibuat di dalam laporan GFI. Usahlah beliau menghabiskan wang negara mengunjungi negara-negara asing dan menyalahgunakan saluran diplomatik untuk menjaga tepi kain Pakatan Rakyat dan Dato’ Seri Anwar Ibrahim.

Akhirnya, fitnah Umno/BN bahawa Pakatan Rakyat menggunakan saluran antarabangsa demi kepentingan politik tidak ubah seperti meludah ke langit terkena muka sendiri; apabila Presiden Umno/BN sendiri yang sibuk memohon simpati dan bantuan antarabangsa untuk berdepan dengan Pakatan Rakyat dan Dato’ Seri Anwar Ibrahim.

MOHD RAFIZI RAMLI

PENGARAH STRATEGI

28 JANUARI 2011

The MRT: Old Habit Dies Hard

Malaysia is a nation in haste. It is in our habit that we rush things, more often than not paying the price of the rushed decisions later down the road. Even when I was still an accountant managing finance operations, I always lamented our society’s obsession with speed at the expense of quality and thoroughness. Luckily we are such a rich country that we can still afford the price for the mistakes done due to the rushed decisions. For how long we can do this is anybody’s guess.

Of all the mega projects recently announced by the government recently, the mass rapid transit (MRT) is undoubtedly the project with the highest financial, social and economic impact. With an initial price tag of RM36 billion, it is expected to lessen the public transport woes in the Klang Valley considerably when it becomes fully operational in 2017. Malaysians have long called for an integrated public transport system in the Klang Valley to alleviate the traffic problems, so when the project was announced naturally it was received with a cautious sigh of relief.

It is unfortunate that the failure to present a solution to lessen the public transport woes sooner is now used as an excuse to hasten the decision making on the project, especially when we are looking at a financial commitment of epic proportion (by the national standard). It is deja vu all over again, with the government rushing the decision and project.

For a start, the RM36 billion price tag is not only high (which in itself is an under-statement) but is suspect. There has not been a full disclosure of the breakdown of the cost or the extent of future financial commitments to be borne by the public. It is difficult to ascertain whether the initial statements issued by the government on the nature of financing required for the project was intentional or resulted from a mix-up. Whatever it was, it was initially implied that the MRT project, as one of the entry points projects, will be funded substantially by the private sector only to find out later on that the funding will come from public funds.

In a way, the announcement to award the right to design, develop and construct the MRT system to Gamuda-MMC without a tendering exercise was met with a docile public response. This is expected as the public was under the impression that the project would be funded privately by Gamuda-MMC.

Unfortunately, details emerged later that the MRT project would utilise public funds after all under a hybrid arrangement where Gamuda-MMC will be appointed as the project delivery partner. The government explained that the risk for cost overruns and delays will be borne by Gamuda-MMC, as if that will make up for the absence of an open tender process promised earlier.

My discomfort with the recent developments on the project is not only confined to the manner Gamuda-MMC was given the project on a silver platter (after all, you get used to it after a while), but more so on the price tag quoted.

I was made to understand that Gamuda-MMC had spent millions of ringgit to complete the study and engineering design of the proposed MRT project. It went to the government with the engineering design and it is this design that was adopted in full by the government under this project delivery partnership (PDP) arrangement. The price tag of RM36 billion is therefore a result of a study and engineering design commissioned and directed by Gamuda-MMC.

Under the PDP arrangement, Gamuda-MMC will act as a project management consultant (PMC) and a turnkey contractor to deliver the project. This will give it substantial influence and power to award packages to subcontractors, while the full financing will come entirely from the public funds.

Let’s go through a few hypothetical scenarios.

How sure are we that the RM36 billion price tag for the construction (excluding rolling stocks and several other packages) are not inflated to build in the financial buffer and to mitigate the risk for Gamuda-MMC? What guarantee do we have that an army of value engineering experts and quantity surveyors have been employed by the government to comb through the proposal and engineering design to ensure it brings the best value for money for the public?

Are we certain that the RM36 billion is the full cost of the project, or only for a few packages of the project? If the RM36 billion only covers the cost for a few packages, what is the full sum of the project?

What is the development concept for the MRT stations? While the government is expected to acquire the land necessary and pay compensation accordingly using the public funds, who will own the MRT stations and the prime land surrounding each MRT station? If each station development is going to be awarded separately, will the government award each station and the land bank around the station to the highest bidder?

How can we ensure transparency and avoid a conflict of interest when the PDP (Gamuda-MMC) is expected to be the leading bidder for the underground package?

Even if a proper tendering process is instituted, what guarantee do we have that the public pays for the bare minimum that it requires for a satisfactory and integrated public transport system not an overblown project that is designed and implemented with the developers’ need in mind, because the public had given Gamuda-MMC the blank cheque.

In all of this, what is the role of the Land Public Transport Commission (SPAD) and how can it ensure that we pay the right price for the MRT system that we are building? Will the cost balloon to RM50 billion by the time the project is completed?

And there will be intense competition to grab the stations most strategically located and the landbank surrounding them, most of which will be decided by way of direct negotiations. In 10 years’ time, Malaysia’s public debt level would have hit the 60% mark (out of GDP) for the first time due to the large debts including funds taken to finance the MRT. In addition, the existing light rail transit and monorail systems continue to make losses each year and consume public funds.

The country’s award and running of the LRT and monorail services was a bad experience because it was not well planned and thought out and now we are rushing the MRT project. We might land up with the same problem in the future.

The questions pose need to be answered thoroughly to avoid the country falling into a deeper abyss of debts. The public must not be blinded by the yearning for a fully integrated transport system that we fail to exercise vigilance.

Rafizi Ramli is chief executive of the Selangor Economic Advisory Office.

This article appeared in The Edge Financial Daily, January 25, 2011.

Subsidy Rationalisation: A Question of Priority and Affordability?

The recent announcement by Dato’ Seri Idris Jala of a new “price adjustment” for petrol, diesel, LPG and sugar was expectedly met with mixed reactions – depending whom you speak to. Although the public relations branding of the subsidy rationalisation exercise seems to be working (judging from the public response so far), the announcement broke a few promises made earlier by the administration.

At the beginning of the year, PEMANDU came very strongly with its commitment to reform the energy sector, in particular the massive RM19 billion subsidy borne by PETRONAS each year to keep the natural gas price to TNB and independent power plants artificially low. There was an understanding that PEMANDU would put a high priority for the rationalisation of this subsidy while it pushes for gradual removal of fuel subsidies.

Dato’ Seri Ismail Sabri Yaakob (Domestic Trade, Cooperative and Consumerism Minister) also famously said that there would not be any new price hike on fuel and essential goods after the first series of price hikes in July 2010.

Both commitments were broken, hence the mixed reactions.

I took a particular interest in the question of subsidy rationalisation since 2007 given my professional background in the oil and gas industry. Continuous dependent on artificially low prices of energy is a bad thing for the economy, especially when our oil resources are depleting and the subsidy is extended to everyone. It distorts the real cost (and therefore the value) of fuels and worse, it promotes wasteful consumption habits.

But the issue should also be viewed from a wider perspective. There is also the moral issue of extending state assistance to the group most burdened with escalating cost of living, more so when the bulk of the nation’s income is derived from its hydrocarbon riches. If governing is about ensuring social and economic justice in a society, then we cannot divorce the philosophical issue of a just distribution of the nation’s wealth to the needy, notwithstanding the urgent need to reduce budgetary deficits.

It is in this respect that I defer from the conventional views that subsidy must be removed at all cost. Fuel subsidy is a luxury to those who can afford a certain lifestyle, but a necessity to the households whose disposable income is too small for them to make any spending adjustment.

40% of our households (roughly amounting to about 8 million people) earn on average RM1,500 per month. The bulk of this wage will go to pay for basic household expenditures such as housing (rent, mortgage), food, school expenses, energy (electricity, fuel) and clothing. It is estimated that 80% of household income for such families will go to these expenses, leaving little room for them to manouvre each time the government announces new price hikes on essential goods.

To these families, a 5 sen hike in fuel, a 20 sen hike in sugar and LPG will make a big difference to them as their disposable income will be affected immediately. For them, there is a moral justification that some form of assistance needs to be extended to lessen their burden.

Therefore, I always suggest that we should discuss the issue of subsidy rationalisation from the primary question of affordability. Can the nation afford allocating a sum each year to provide subsidies on essential goods meant for the lower income groups most affected by any price hikes? How much does it cost to do this? How much does the cost for this compare to the total income generated from our hydrocarbon resources?

Previously, it was quite difficult to put the numbers together due to the unavailability of information especially the amount of subsidy for each litre of fuel borne by the government. The credit must be given to PEMANDU which had had no qualm to share with the public that the government bears a subsidy of 40 sen per litre of petrol when crude oil price is in between the USD70 to USD80 per barrel range. This allows for an economic model to be built, assuming that refining cost and refinery margin do not change much over a fixed period of time.

Based on the latest public data provided by the International Energy Agency (IEA), 61% of oil products (from crude and refineries) in Malaysia were consumed for transportation purposes in 2008. Industry usage makes up the second highest consumption at 23%.

For transportation, a total consumption of fuel (by private and industry users) translates to an equivalent of 9.8 billion litre of petrol and 5.3 billion litre of diesel annually (both figures are estimates, taking into account different conversion and estimation methods used). This adds up to an estimated amount of RM7.5 billion of total subsidy for transport fuel borne by government each year.

Going back to the question of necessity and afforability, out of the 15 billion litres of fuels (petrol and diesel) consumed for transportation purposes each year, a significant portion of this is consumed by the private sector and the industry. Since an official figure is not available yet, even a hypothetical estimate of 50% split between individual and private/industry consumption will alter the picture quite radically. I dare say that only RM3.8 billion to RM4.5 billion of the fuel subsidy actually goes to individual citizens for their private use. This does not discount the fact that a great many in our society will not qualify for fuel subsidy, if fuel subsidy is extended only to the needy groups.

So in the end, it boils down to the most basic question which I have repeated in the past: can we afford a fuel subsidy of RM3 billion a year (assuming crude oil price in the region of USD70 to USD80 per barrel), if we were to gradually remove the fuel subsidy for the industry and private sectors (having been convinced that it will have a minimal impact on the inflation)?

Once we stack this magical number against all the other figures, I will leave the conclusion to the readers. RM3 billion against RM19 billion in gas subsidy to the power sector (while some of the IPPs continue to reap huge profits) is a small sum. RM3 billion extended to the most hard-pressed section of our society against an estimated RM4 billion in compensation to toll concessionaires should provide a different perspective in the debate on subsidy removal.

One may argue that the RM3 billion subsidy cost will balloon up as the crude oil price soars in the future. But Malaysia is still an oil producing country with the current production of 650,000 barrels of crude oil each day. An increase in crude oil price will also increase the income to the government. This comes in a few forms such as the oil royalty, supplemental payments (depending on the production sharing contacts/PSCs signed), duties, petroleum income tax, corporation tax and dividends from PETRONAS.

A rough calculation (taking into account the structure of PSCs in existence, reimbursement of cost oil and availability of profit oil as dividends) of income stream to the federal treasury from PETRONAS and domestic oil and gas industry shows that for each USD5 per barrel increase in crude price (on annual average), the government will earn an estimated RM4 billion in extra taxes, royalties, duties and dividends annually.

Thus, not only that the annual income from the nation’s hydrocarbon resources (drawn at an average of RM81 billion each year from PETRONAS for the last 5 years) is adequate to pay for the RM3 billion fuel subsidy targeted at the needy groups, any crude oil price hike should yield additional income that can cover the increase in subsidy cost.

The rest is a question of political will.

Will the Prime Minister continue to push for subsidy removal that affects the masses while being non-committal with the massive RM19 billion gas subsidy given to the IPPs?

Will the Prime Minister continue to tolerate PEMANDU’s failure to come up with a practical mechanism to streamline fuel subsidy to the needy groups, as this should have been the prerequisite before any decision to remove fuel subsidy was made?

The public will expect the government to set its priorities right in managing the gradual removal of the subsidies, so that we do not penalise the groups still dependent on subsidies on essential goods to help make ends meet.

A Malay proverb aptly describes this balancing act as “bagaikan menarik rambut dari tepung, rambut yang ditarik tidak putus, gandum tidak rosak”.

This article was published in my column in The Edge (the published version could have been edited slightly)

Step-Changing The Economy: Education, Education, Education?

This is the final article in a 3-part series published in The Edge on addressing the key constraints of our economy

It is a common observation by most that Malaysia suffers from three acute constraints in step-changing the economy towards a high-income nation.

The first constraint is the relatively lower level of capitals available for enterprises to expand, indicated by a stagnated level of private investments for the last decade and compounded by a severe drop in foreign direct investments. Secondly, the nation has not made a big leap in transforming from a technology user to a technology creator.

My views on these two constraints have been shared in the last two articles.

Fortunately (or unfortunately, depending on which perspective we take later), both constraints have its root in the one issue that arguably has had the biggest influence on the direction of our country and its economy – our education system. The make-up of our society is predominantly influenced by the education system. By extension, the ability of our workforce to drive the big step-change into a high income economy will depend on what kind of educational upbringing they have had so far; to prepare them for the demands of a high income economy on its workforce.

What are these demands? These are well-known and have been articulated well in various economic planning documents for Malaysia released in the last one decade (to the credits of the civil servants who prepared them). A workforce that is productive and creative can subsequently innovate. Innovation (new products, new service, new thinking) drives the economy to a much higher income level.

That is easy enough to establish. What has proven to be the most difficult for our country is to make the upgrade from a workforce designed and trained to man manufacturing facilities (and paid relatively cheaply at that!) to the one which design the manufacturing facilities. Making that journey has proven to be the biggest bottleneck for the last thirty years.

So where should the journey begin?
Fortunately, most of the bottlenecks in the efforts to make this upgrade can be traced back to the education system. An education system that is rigid and too obsessed with structured model of success carries an inherent risk of stifling creativity and innovation. An education system with only one model of answers that restricts the exploration of reasons and ideas beyond the ones approved by the authority can also kill off the creativity altogether. So, if we fix the education system we can say we have progressed well in the journey.

Unfortunately, fixing an education system that has evolved over a century and as diverse as ours, will prove to be a difficult task. What more when the framework of our education system is very much intertwined with the socio-economic and political structure of the country – undoing the make-up, approach and design of the education system is by itself a near revolution because it is akin to undoing the socio-economic and political power structure that has dominated this country for so long.

So I will not attempt to comment on the humungous task of redrawing the education system as this short article will not do justice to the gravity of the task. It is a philosophical question and challenge which will continue to haunt and define our society for many years to come.

However, there are a few radical thoughts on education system that may have a profound impact on the development of our workforce; that can be implemented without the redesigning of the education system framework of the country. I will attempt to explain three such thoughts here.

First thought concerns the school environment that is imprinted in the minds of our future workforce during their formative school years. In general, our school has not been able to become a place where a student’s potential is realised. Interestingly enough, I feel it has failed to do so not because it lacks resources (as often is simplistically argued, each time we discuss the failings of our education system); but because we only cultivate one model of success. In the process, we fail to inspire our younglings and eventually they choose to conform to expectation, even if it does not bring the best out of them.

I came across a case of one Malay student at a top boarding school, who did not do too well comparatively in his SPM. He never liked science stream but had to do science because the whole school was supposed to do science subjects. Not surprisingly, he struggled along the way and his result was not good enough for a scholarship post his SPM. Naturally the system expected him to go to a matriculation as a step to enter into a local university; but he had a different plan in mind.

He chose to do STPM instead and had had a difficult time explaining to the school, teachers and relatives why he chose that route, as many people will only consider STPM as a last resort. Luckily, he scored well in his STPM after he switched to economics; offered a JPA scholarship and now reads economics at one of Australia’s top universities.

It may be a remote case that does not repeat too often; but it exemplified the mentality of conformance that restricts ideas and reduces the boldness of our future workforce to experiment. This conforming, “one model of success” school environment is detrimental to our economy because we need to cultivate a sense of inquisitiveness and risk from the very beginning. Otherwise, our future workforce will continue to fall back to what is being given to them – they won’t be creative because it is outside conformance, let alone being innovative because that can be too upsetting. In the end – from the offices of civil servants to our factory shop-floor, we are a nation of “yang menurut perintah” and “this is how it has been done forever”.

In this respect, I welcome the plan to put more emphasis on school-based assessments and move away from the rigidity of national exams at all levels. However, this is only a tool and will compound the situation (if school heads begin to cut corners to produce better school-based assessments linked to their promotion) unless there is a radical change in our school environment so that we encourage differences, exploration of ideas and some risk taking among our school children. Hopefully they will retain these traits as they grow up – they can do wonders with these traits at work!

The other thought that has tickled me over some time concerns the policy to send top scorers after SPM/STPM overseas for a degree. This must have consumed billions of ringgit in national budget each year; so considerable financial resources that could have gone into our local higher institute of learning ended up as a significant foreign exchange earner for other countries. If the equivalent financial resources are diverted to the local institutions, there can be a significant improvement especially in terms of facilities.

But even the impact of few billions gone is minute compared to the impact of not having the top 3,000 brains each year going into our universities. This is where (I think) there is a taboo when discussing the performance of our local institutions and someone should be bold enough to call a spade a spade, even at the risk of hurting the sentiments.

The fact of the matter is this country has annually sent thousands of its top students overseas, thus depriving the local institutions the necessary infusion of good students as a catalyst for competition and standards among the peers. This is a policy that dates back to pre-Merdeka days and is considered sacred for (strangely) both Bumiputras and non-Bumiputras. Thus, it is not easy to argue against the continuance of the policy.

Yet, the impact of this deprivation comes in many folds.

The local institutions have to grapple with various questions on standards and competitions, as they have to work within a certain sets of constraints to meet their deliverables. The top students going overseas may not necessarily fulfil their potential and achieve the maximum benefit from their overseas stint, because many chose to stick in small circle of Malaysians. This argument can be strengthened further by the fact that the number of Malaysian scholarship recipients admitted into the world top universities is still relatively small.

Even worse, those who did benefit greatly from the overseas experience will realise that the world is their oyster. Many choose not to return and I dare say it is one of the contributors to the brain drain we are facing. By the time they have settled down overseas with good home and good pay, it is very difficult to lure them back (unless you can match the pay, but then how many companies or organisations can do that).
We should question whether there is a case to continue sending top students for a degree overseas since we have the means to cater for their placement at local institutions, unlike the yesteryears when we just do not have enough places locally. Should we not restructure our national scholarship system so that only post-graduate students are sponsored to go to top universities and research centres world-wide – after all this will have a more profound impact on our economy, than producing overseas first degree holders?

Thirdly, if we were to redirect our top students leaving the school system each to local institutions, the latter has to drastically improve its standing to do justice to these students. The ways and changes required to effect this have been discussed greatly elsewhere (and I am running out of space for the column!) so I will not discuss it here.

I won’t fault you if you feel cheated that we end up talking about schools and universities instead of economics and numbers. My belief is we can forget about the high income economy unless we go back to the basics and address the major stumbling block towards that journey.

Cliché as it may sound, the remedy to the economic malaise we are facing may not be economics at all – we can benefit greatly by going back to the New Labour’s cliché of “Education, Education, Education” in 1997 that put them in power for the longest time and presided over the longest boom. We should learn a thing or two from that.