Malaysia Chronicle: An AirAsia wake-up call to the BN crony-infested business model... by Maclean Patrick

An AirAsia wake-up call to the BN crony-infested business model

Written by  Maclean Patrick, Malaysia Chronicle, Monday, 25 July 2011 12:42

In what many see as a blow to Prime Minister Najib Razak’s grandoise economic plans to create a high-income nation, AirAsia’s decision to move their headquarters to Jakarta may spell the acceleration of an exodus of businesses out of Malaysia, though not many will be as big or as shiny a jewel in the crown as the homespun low-cost air carrier.

When interviewed by the media, Tony Fernandes was rather guarded in his comments as to why Jakarta was picked. But the AirAsia group chief executive, confirmed the decision in Tokyo, saying the move is an effort to upgrade his company’s image as a regional Southeast Asian airline rather than just a Malaysian carrier.

Fernandes characterized the move as a simple business decision to take advantage of Indonesia’s vastly larger economy and population. This is nearly 10 times that of Malaysia’s, although Malaysian annual per-capita gross domestic product of US$14,700 by purchasing power parity is much higher than Indonesia’s US$4,200.

However, the sheer size of the country's populace means that the Indonesian economy is at towering US$1.03 trillion versus Malaysia's US$414.4 billion, based on estimates in the CIA Factbook for 2010.

Business is business

Business is business and Fernandes' decision seems timely. For years, AirAsia has been battling for more rights to fly in Malaysian air-space with the government-backed MAS jealously throwing obstacles in its way. But again, in business, this is to be expected.

Even so, every decision to fly within Malaysia has to be scrutinized by the government, often-times favoring MAS and at AirAsia's expense. It is a small miracle that Fernandes has stuck this long with Malaysia, so when opportunity knocks, it is not unfitting for AirAsia to put aside sentimental feelings and allow good business sense to take charge.

AirAsia may well among the more visible Malaysian brands besides the state-owned energy giant Petronas to have made an international impact – and Petronas gets its profile by advertising extensively during Formula 1 races and by sponsoring a car – which Fernandes does as well. Launched in 2002 as a regional no-frills carrier with just two planes, AirAsia now flies 93 planes all over Asia. In addition, a long-haul service, AirAsia X, flies to Europe, Japan and Korea. The company earlier ordered 300 Airbus A320neos.to expand its routes across Asia and beyond.

Despite being a homegrown Malaysian start-up, Fernandes has had to contend with bias - yes, racial bias of not being tied to an UMNO crony. Malaysia's business circles are largely controlled by the UMNO-led government. This form of control by the government playing favourites is irritating, degrading and most of all makes Malaysia uncompetitive. It can only hinder firms from becoming the best in the region or even the world, and Air Asia is no different.

Asked why he chose to move the fast-growing airline’s principal corporate base to Jakarta from Kuala Lumpur, Fernandes said: “Asean is based in Jakarta, and Indonesia will be the largest economy in ASEAN in time to come. And I like it there."

Riding on a resurgent Indonesia

According to AirAsia, the move is also a bid to take advantage of access to the ASEAN secretariat, which is based in Jakarta, ahead of an open skies agreement expected to go into effect in 2015 and which is designed to lower barriers for air travel between the region’s capitals.

The Indonesia National Air Carriers Association forecasts passenger growth at 10 percent to 15 percent this year. Indonesia’s Central Statistics Agency reported that domestic air traffic grew 22 percent to 53.4 million passengers in 2010 on growing demand from the middle class for domestic flights. That is higher than the 9 percent average increase recorded by Asia-Pacific carriers, according to data from the International Air Transport Association.

Indonesia’s economy is also poised to grow and with it a growing interest in domestic low-cost airlines which will benefit AirAsia. However, local customer confidence in its own low-cost carrier has been hampered by poor maintenance, which has led to some of the worst airline crashes in Indonesian history.

AirAsia, with their service record, has a good chance to win people over; the potential for profit on just the Indonesian domestic routes alone, would grow AirAsia’s profits in folds. Yet, AirAsia’s move to Indonesia is the story of most Malaysian start-ups that have had to diversify and move operations out of the country just to see their businesses grow due to the suppressive conditions at home.

There was also Genting

Another Malaysian start-up and successfull business entity is Genting Berhad, which has a market capitalisation of US$13.6 billion as of 31 May 2011, making it the leading Malaysian corporation to date. Fearing a shift to Islamic puritanism in the 1990s and it’s affects on his Genting Highland’s operations, Lim Goh Tong, the late company founder, diversified Genting Berhad’s business ventures.

From its initial leisure and hospitality activities, the Genting Group has since expanded and diversified into other activities including plantations, properties, power generation, oil and gas, e-commerce and the development of information technology.

Genting Group is the founder of Star Cruises the third largest cruise liner company in the world and largest cruise liner in Asia and its headquarter is based in Hong Kong. As of December 31, 2010 Genting Malaysia now owns the the largest number of casinos in the UK with 46 casinos. Lim’s business empire have interests in Singapore, United Kingdom, Philippines, USA and Australia.

The feared curbs on the Genting Highlands' expansion never came to pass, but Lim's relationship with the government was odd. He was forced to renew his business licence every three months, while the sin of gambling was constantly denounced in the run-up to every election.

In other words, Lim had to live in fear his business empire could be closed down any day and any time the religious extremists in UMNO decided to do so. His son, Kok Thay is now in charge and has diversified the Genting franchise beyond recognition into Singapore, Europe and US.

Before Genting, there was sugar-King Robert Kuok who reinvested his money in Hong Kong and China in the 1980s. Even the YTL group has diversified the eggs in its baskets by acquiring stakes in utilities in the UK, Singapore and other parts of the world.

Not that AirAsia, Genting, Robert Kuok or YTL have not benefited from the BN model. For example, Robert Kuok and YTL's Francis Yeoh are frequently reported as being close to former premier Mahathir Mohamad and Genting got its first break from Tunku Andul Rahman, the first prime minister. But in the case of Genting and Kuok, their overseas success is very much their own effort and overshadow their Malaysian assets.

Ineffective GTP, ETP

Najib, for all his grand-sounding Economic Transformation Programmes, would do well to study what makes true businesses work. It is not wild pie-in-the sky figures that scare potential investors at the mere mention of the zeroes involved in his grandoise plans but sheer savvy and enormous hard work.

There is also such a thing called level-playing-field and rewards based on merit, rather than, "I help you, you help me". If Najib wants to spout such philosophies, he would do better to the treasurer of a community hall in a remote village collecting rents for the badminton court and ping-pong tables, rather than be the Finance minister of Malaysia.

In bid business - without corruption that is - recognition must be given to the best talent, to best bid and to the most productive venture. As the Robert Kuoks, Gentings and AirAsias fly off for greener and fairer pastures, the BN's Government Transformation Programme is still stuck and left to languish amid regret for not being able to retain Malaysian start-ups destined for global glory because of its fatal mistake of over-politicising business.

- Malaysia Chronicle

malaysiakini: Power is duty, not a prize.... by Razaleigh Hamzah

Power is duty, not a prize

Razaleigh Hamzah
Jun 19, 2011, 10:29am

 

Malaysia's post-colonial history began with optimism and a grand hope in 1957. When Tunku Abdul Rahman, the first prime minister of Malaysia, proclaimed our Independence at the Merdeka Stadium in the unforgettable words that "Malaysia is a parliamentary democracy with an independent judiciary," he had a vision of a happy people in spite of the formidable economic problems we needed to solve.

After that dawn of independence, there was a search of how we could achieve this happy society, fulfilling the needs and aspirations of all Malaysians which was to continue for the generations to come. He symbolised the concept and conviction of generational responsibility in his vision.

Tunku Abdul Rahman and his generation were dedicated leaders, not for power but a sense of duty to the present and the future. They were not in politics for the money or for themselves. Indeed, even after they had assumed power, they never used their position to benefit themselves or their families, nor did they build loyal cronies who would act as their financiers or hold any wealth unlawfully earned at the expense of the people.

The guiding philosophy was responsibility of public office. Public office was seen as a duty, not as an opportunity. The public office was also part of their sense of political commitment to create a Malaysia that was fair, just, cohesive, and balanced. This was combined by a deep conviction of generational responsibility for those who would come after them.

Our three lost decades

One of the greatest losses in public life and in politics today in Malaysia is that loss of generational responsibility. Everything seems to be surrounded by greed and the desire to be billionaires.

This had led to a pyramid of cronies within the incumbent political parties and their associates in business. It is this combination of the hierarchy of political cronies and business cronies that led to the centralisation of power in the incumbent political leadership and in the Office of the Prime Minister.

This power in one individual allowed the manipulation of the political system; I mean by this the institutions of power including the media. In exchange for the centralisation of power, greed and self-interest were encouraged by example and in the guise of racial loyalty deserving rewards.

This is the case in all the parties within the power structure. This state of affairs is one of the most dangerous and difficult to dismantle because there has been three decades of centralised power.

The political style that has dominated in these lost three decades has been "double-think" and "double-talk". One of the features which is alarming in this plan to maintain status quo is the encouragement covertly of racial and religious obscurantism.

The underlying theme was a policy of using a balance of racialism and religion on the one hand and talks of unity on the other hand in order to make the people hostage to the status quo of power.

As a result, racialism and racial concerns seem to have a grip on all aspects of our lives, in politics, economics, education and employment, irrespective of the present reality which has got nothing to do with race or religion. We are deliberately made to feel that we are hostage to these forces.

Freedom of speech and expression of our political concerns to change the atmosphere are restrained by how it will be interpreted by those who want to deny us the right to differ.

Article 10 of the Constitution which guarantees this freedom is almost non-existence or subject to fear of retaliation or defamation. Legal suits intended to silence legitimate concerns of public responsibility are increasingly used.

Unfortunately, our judicial system has forgotten the fundamental importance of Article 10 to the democratic life of Malaysia. Common sense seems to have been taken out of the law.

Obscene income inequality gap

On the economic front, income inequality in Malaysia has widened. Some studies suggest that Malaysia's inequality is wider than Thailand's or Indonesia's.

Historically, the concern was about ownership and control of the economy. It was the view of some that if ownership was de-racialised or balanced at the top, economic justice would follow. It is no longer a valid premise for the future.

Income inequality is no longer a problem between races; it crosses the racial divide and it is a problem of the majority of Malaysians who feel the pressure of inflation in almost every essential aspects of their lives, challenging their well-being of themselves, their families, and their future.

Today and in the near future, this is the most serious challenge we face. It is not an easy challenge to overcome. It is a time when Malaysia needs leadership of the highest quality and of those who have the moral courage to change and re-think our economic policies.

It is in these circumstances that we face the serious problem of rising food prices, inflation in price of houses compounded by shortage in housing for the vast majority of young Malaysians.

Lack of economic expansion to give all levels an opportunity to use their talents to seek work that is commensurate with their contribution, their needs of daily life, and to narrow the inequality gap, is the threat of the future.

Therefore, we should be concerned about the justification of the removal of subsidies that affects the low income because that will further widen the inequality and open the society to social disorder and disintegration, and increase social incohesion.

It is in this context that I raise the issue about independent power production companies (IPPs). The privatisation contracts are today protected by the Official Secrets Act, and therefore we are unable to really know whether or not the public and Petronas, as trustees of the public, are directly or indirectly subsidising these companies and the tycoons who are benefitting at the expense of the public.

Related to the question of the withdrawal of subsidies is the deficit that the government suffers from in managing the economy. This question cannot be separated from the way that the government has managed the nation's finances.

If the deficit is as a result of wastage, corruption and extravagance in the use of public funds, then the solution to the problem should not be passed on to the public. What is needed is a reexamination of the management of the country's finances before taking any drastic steps that would affect the well-being of the people.

We need to know the reality behind the apparent subsidies that are given to the public and its relationship in the totality of the management of the public finance. Only after we know the truth - and the whole truth - should any change in the policy of subsidies be implemented, as the consequences would have life-changing impact on the livelihood of the people.

In the circumstances of rising inflation in food, stagnation of the economy and income, we should not do anything that would widen the disparity of income which would cause social instability.

Rule of law, not of men

The challenge today is for the return to generational responsibility in politics and public office. This can only be achieved if we have democracy and parliamentary power which is responsible.

Democracy was the basis of the founding of the state of Malaysia by the Constitution in 1957. When it was briefly suspended in 1969, the leaders of that generation were uneasy, and they restored democracy as soon as possible.

That is because they realised that democracy has an intrinsic value in creating a citizenship that is not made up of sheep but of responsible citizens. Only responsible citizenship that understands democracy can bring about stability, cohesion and economic prosperity.

During those days, it was ingrained in that generation of leaders that democracy was not only a form but a value system that respected the essential institutions of democracy like the independence of judiciary, the supremacy of parliament subject to the Constitution, the respect for fundamental rights, and free speech.

They also understood the meaning and primacy of the rule of law and not of men. They also knew that democracy is the common heritage of humanity that we inherited and have a duty to continue. The law that they understood was also from the common heritage of all civilised nations.

And one of our inheritances is the common law system of the rule of law which is enshrined in our constitution. They knew that the phrase "common law" meant the wisdom that is passed to us in the progress of law and the values that are encapsulated in the law governing public office and responsibility to society. That laws are meant to enhance democracy and freedom but not to maintain and continue political power that is inconsistent with the rule of law and the constitution.

Independence did not come with peace but with very difficult problems, particularly the management of the economy and transforming it to bring about a balance between all the racial groups.

They realise that some of their problems had roots in the history of Malaysia. There was a serious imbalance between the countryside and the urban sector with racial dimensions which were too sharp. Indeed, poverty was also quite prevalent. There were open discussions and experiments.

Some of you may remember that one of the highlights of public debate was organised at the University of Malaya under the title, 'The Great Economic Debate' every year. That disappeared with the changes in the Universities and University Colleges Act and the decline of universities' autonomy.

The search was to eradicate a sense of inequality between the various peoples of Malaysia, whether because of one's identity and social origins, or for other reasons. It was as part of this search that during Tun Abdul Razak's time, the Second Malaysia Plan was launched in 1971.

We need to be reminded of the objective of that plan:

"National unity is the over-riding objective of the country. A stage has been reached in the nation's economic and social development where greater emphasis must be placed on social integration and more equitable distribution of income and opportunities for national unity."

Erosion of the Malaysian Dream

That dream was slowly eroded from the mid-1980. The hope that we had at that time is now challenged in the most serious way.

Recently, Petronas announced that it had made a RM90.5 billion pre-tax profit. If we accumulate the profit of Petronas over the years, it would come to a mind-boggling figure of billions and billions.

Yet, the greatest poverty is found in the petroleum producing states of Kelantan, Terengganu, Sarawak, and Sabah. This moral inconsistency in a way exemplifies how the nation's economy is mismanaged and how the institutions set up in the 1970s have lost their objective and commitment to solving the immediate and pressing problems of the nation.

Petronas was set up with the objective of serving the nation's interest as a priority. It was never intended to give Petronas a life of its own as an incorporated company for selected individuals to profit at the expense of the national interest, nor was it the objective to allow Petronas a cooperate existence independent of national interest.

What is needed is for institutions like Petronas is to have a national focus rather than maintain a multinational status. The aim of making Petronas a multinational cooperation at the expense of national interest is contrary to the Petroleum Development Act.

Petronas should have a Petroleum Advisory Council to advise the prime minister on the operation of the law as well as the management and utilisation of its resources as spelt out in the Petroleum Development Act.

Another example of the abuse of power is the privatisation of certain government institutions which were set up as a public service to serve the people.

Bernas is one example of a privatisation of an essential commodity as a monopoly for a group of people and owned partially by two companies in Hong Kong. An essential commodity such as rice should not have been privatised for business purposes. We are the only rice producing country that has privatised and given as a monopoly to one company the importation and distribution of all rice products.

The reality today is Thailand and Indonesia are self sufficient in rice and we are dependant on 30 percent of imported rice. But because it is a monopoly, imported rice is cheaper in Singapore than Malaysia.

Privatisation for the benefit of private individuals to profit from such an essential commodity is a clear abuse of power. It would not have happened in those days. But with the centralisation of power in the office of the prime Minister who had the party under his absolute control, anything was possible!

I will suggest to you that there was a deliberate plan to centralise power in the leadership in a surreptitious manner. Unfortunately the nature of racial politics blinded us of the reality behind certain policies and conduct of leaders at that time.

RM880 bil in capital flight

The decline of democracy, the abuse of power, and the mismanagement of our economy and the nation's finances, the economic waste, the lack of national cohesion in our economic policies led to the flight of capital in the region of RM880 billion over the years from the 1980s.

That was the beginning the lost decades and the full impact of the consequences of the economic policies which has continued since then, is yet to have its full impact on our national lives. And when it does the consequences are unpredictable.

The centralisation of power in the Office of the Prime Minister and the attorney-general had a major role in this state of affairs. The challenge today is to reverse the centralisation of power and restore the check and balance of a genuine democracy.

We need to reclaim as citizens of Malaysia our rights in a democracy; that power and authority are positions of trust and responsibility, not to serve personal interest or as an opportunity for personal enrichment. We need to reassert as politically active and responsible citizens the concept of social obligation and public service in those who seek political office. Power is duty, not a prize.

We need to rethink our economic policies. Particularly in the focusing on the national objectives that are urgent; economic policies is not only about wealth creation but needs to have a moral dimension which takes into account the well-being of all citizens as the ultimate priority over profits.

I have given you a broad sweep of the past and a bird's eye view of the looming problems of managing our economy as it is today. I hope this will open a dialogue which benefits all of us.

TENGKU RAZALEIGH HAMZAH is former finance minister and Gua Musang MP. The above speech was part of the Perak Lectures, organised by Perak Academy on June 18 in Taiping.

2008: Annus Mirabilis: The year that was... Part 2

6. The foundering disappointment of the Abdullah Badawi government
When he first took over the helm of Prime Minister, Abdullah Badawi was seen as the next hope for change toward a gentler, less corrupt, less autocratic government. He did promise to clean up the act. But alas, the wheels of change under his watch, were truly grinding under the weight of ponderous inaction and torpidly unconvincing pledges—some talk, but generally no action. At least, none worthy of institutional progress.

If anything, he let his cronies, his fourth/fifth floor gatekeepers led by his son-in-law KJ, control the engine of his listless administration and the nation's projects for development. As a result the country literally stalled, with gross incompetence, venal and shameless bartering for ill-gotten gains and extravagant wastage!

It was as if the wealth and direction of the country now hinged on the grandiose if untested whims and fancies of a small coterie of young 30-something year-old Oxbridge graduates, beholden only to the ambitious Khairy Jamaluddin.

Rumours of his excesses are probably just that. But the unflattering perception became disastrous for the Premier, who seemed unwilling or unable to rein in this appealing if brazen young man (in closer circles, he had been quoted as having said that he would become prime minster before the age of 40!)

His impatience and his greater-than-life belief in himself and his worth clearly antagonised more than just the ordinary Malaysian, his UMNO brethren began to openly question and challenge his stature and his ambition. Thus, began the break-up of the cosy unity of purpose of UMNO-dominated largesse and its shattered myth of political goodwill. It finally boiled down to everyman for himself, as they wrangled for the spoils of dominance, influence and connections.

The strong 2004 electoral mandate given by a hopeful rakyat, was therefore quickly sapped and frittered away, with escalating disenchantment with Pak Lah's lethargic style of leadership. Ambitious and impatient political rivals skirmished and began to sorely test his mettle, and left in its wake, a lingering if haunting disservice to his vitiated legacy.

Some kinder pundits have equated him, Pak Lah to be Malaysia's Gorbachev—a sort of an enlightened leader who espouse a new beginning (sadly, equally nebulous in the final anaylsis), an openness, a glasnost, for greater democratic space—perhaps, they were right...

But ultimately, being benign and gently ineffectual (perhaps even a seat-warmer?), is never enough to hold on to power in this hurly-burly world of politics... Pak Lah would soon have to relinquish his mantle of power, (one which we sense he was uneasy to begin with anyway), brokered through an uneasy truce with his number two.

His tenure of Premiership is best summed up as forgettable, even as he tried at the last gasp to enact new laws (the watered-down MACC, JAC) which would lend some spotted burnish and meaning to his lacklustre administration.

Still, it is true that Malaysians were given a chance to become more outspoken, more willing to question the status quo, braver with the uncensored anonymity of free-expression aided by the mushrooming alternate media—the blogosphere, YouTube and the world wide web through the internet. So, in a sense we should be grateful.

But, perhaps, it is also the spirit of the times, the zeitgeist of a new interconnected world, where civil liberties and expectant human rights have matured with presumptuous free expression, information ubiquity and where knowledge access is de rigueur, even inevitable...

7. The ex-PM who would not go away...
Mahathir Mohamed, now Tun, our ex-Premier for 22 years, must be that permanent fixture on any Malaysian political scene, who refuses to fade away.

There is much that can be said of this singular man, but there is also sadness that having achieved so much, he has clung on to his cast-in-stone ideas that Malaysia must be the Malaysia of his own, and perhaps his only image.

There can be no doubt that Mahathir placed Malaysia on the world map pedestal. He developed modern industrialised Malaysia in the mould of strong and autocratic man of yesteryears. Malaysia is made known globally because of his untiring efforts to promote a Malaysia that Can, i.e. Malaysia Boleh!

His grandiose schemes while criticised by many of his detractors, might be temporally opportunistic, but his landmarks have become household names in the region as well as globally, e.g. the Petronas Twin Towers, Putrajaya city, the KLIA, the Penang Bridge, Proton cars.

But alas, his other legacy isn't so sparkling or benign, but may be even more painfully enduring and inimical. In his determined quest to modernise Malaysia and uplift the indigenous Malays in particular, he began with unique bold ideas which were beneficent. As a result Malaysia's hard core rural poverty had been drastically reduced, and a sizeable middle class had been created.

However, many of these quickly became blemished as these created a spectacular if exclusive brand of government-linked corporations, and government-aided multimillionaires, very closely tied to or even dependent on the leadership's patronage system.

He did well in removing the scales from the eyes and the parochial mindset of many bumiputeras. He gave them a much-needed self-belief which is undoubtedly important and laudable, for which they can at last become more confident and conscious of their self-worth. He must be credited for having unabashedly promoted the Malay agenda so that as an ethnic group, they can confidently become more fully engaged in the business and affairs of the nation and its development—and hence, could compete on equal footing in this globalised world.

Thus, in times of plenty, when the economy was growing at a vigorous clip, there was enough wealth to be spread around, and every Malaysian appeared to benefit. Hence, in many ways he also made Malaysians of all races, proud to be Malaysians, because of his visionary leadership. But his continued sanction of this affirmative action has also created a subclass of dependency, of crutch-mentality and easy handouts, of rentier capitalism and political largesse.

He also brooked little opposition, challenge to, or restraints on his style and his power, believing that as popularly-elected Premier and government, he had the mandate to rule without interference from the constitutional royalty, the oversight judiciary or the minority opposition. His idea of majoritarian rule appears to be one of absolutism.

His brand of power politics and autocratic rule unfortunately and systematically emasculated these same institutions—the judiciary became beholden and capitulated; the royalty had its wings clipped, and the pliant police were offered unfettered power in exchange for its unquestioning loyalty. Corruption and political patronage practices reached its height, and UMNO-supremacist ideologies pushed to its ultimate arrogant peaks.

Following the March 8 election debacle, he openly led the huge chorus of criticisms casting his blame on the weak leadership of Pak Lah and his family connections. Since then he has all but undermined our hapless prime minister. He has since found a new dimension to his once silenced voice—the resurgence of his acerbic tongue through his immensely popular blog chedet.com!

It appears that Mahathir has issues of not being able to forgive or forget, as he relentlessly pursue his Machiavellian vengeance on whoever crosses him... At 84 years old, he continues to remain as sharp and as artless as he had always been. Until Pak Lah leaves the scene, there is little doubt that Mahathir will continue to badger him and his administration, pulverising whatever little that's left...

As he has already commented, as long as he is alive, he will not keep silent when he feels things are not going his way, neither would he allow Malaysia's fortunes and gains (which he had bulit up over the decades) to be 'jeopardised'. I foresee that Dr M will continue to figure prominently in the coming 2009, health and God willing!