Interview: Wong Chen on a controversial tax bill, how Parlimen Malaysia works, baiting and walk-outs (update 1)

25 June 2014: Interesting developments in the Malaysia fiscal scene bring us to interview again (in an unexpectedly short space of time) Wong Chen, MP for Kelana Jaya. He broke the story on the IRB Act proposed amendment. Over the years I've been loosely following Malaysia fiscal and state-controlled pension investment programs.

29 June 2014: Update 1 comprises inclusion of link and summary of Prof Mukul Asher's analysis.


Picture of The Edge Malaysia business weekly which features the IRB amendment story as follows “Oh no, not the taxman too? Everyone fears the taxman coming after their money. Now the taxman has to worry about people coming after his money. Read our Cover Story on the controversial proposal for the Inland Revenue Board to invest part of its money in stocks and bonds….”

Related posting: ISEAS Perspectives - The Tough Task of Narrowing Malaysia’s Fiscal Deficit by Khor Yu Leng Here's is my review of key risks in Malaysia's fiscal situation and the likely problems in addressing them. These include concerns about patronage affecting the bond market. http://khoryuleng.blogspot.sg/2013/10/iseas-perspective-tough-task-of.html

Other analysis: Professor Mukul Asher's view here, http://asiancenturyinstitute.com/economy/673-malaysia-should-not-mix-tax-collection-with-wealth-generation; concluding that "The 2014 Bill could hamper the task of Malaysia’s Fiscal Policy Committee (FPC), setup in June, 2013 to manage or to help ensure fiscal sustainability and long term macroeconomic stability. In its 2013 Article IV consultation report, the IMF had suggested that the FPC should progress towards greater operational independence, improve professionalism, enhance transparency of fiscal operations, and contribute to better quality public policy debates on Malaysia’s public financial management....  The 2014 Bill however is likely to lead to heightened perceptions of Malaysia’s fiscal risk, and to concerns about Malaysia’s international competitiveness. In the current uncertain and gloomy global macroeconomic prospects and heightened financial and capital market risks, the timing of the 2014 Bill is therefore also wrong...."

An exclusive interview with Wong Chen, Parti Keadilan Rakyat*, Member of Parliament for Kelana Jaya, Selangor, 20 June 2014.

*Parti Keadilan Rakyat is led by Anwar Ibrahim, the de facto leader of Pakatan Rakyat, the opposition coalition that includes the Democratic Action Party (DAP) and Parti Seislam Malaysia (PAS).

Q. On 12 June 2014, you broke the story of a new investment fund proposed via amendments to the Inland Revenue Board (IRB) Act. What was this all about?

The current Inland Revenue Board (IRB) Act allows the IRB to create a fund called the IRB Fund to make investments. The proposed amendments by the Finance Minister sought to create an Investment Panel to replace the IRB’s powers on all investment matters. If the amendments are passed, the IRB will give away its investment duty and powers to this proposed Investment Panel.

In addition, the amendments sought to expand the Investment Panel’s power to invest in any type of investment as long as it is approved the Minister of Finance (currently PM Najib) including IPOs. The amendments are peculiar because the IRB is a tax collection agency and not a sovereign wealth fund. What was even fishier: the amendments propose that the Minister of Finance be given direct and indirect powers to appoint 6 out of 7 members of the Investment Panel. The inclusion of the Governor of Bank Negara Malaysia (the central bank) as the 7th member, was a dead give-away that this fund would not be a small thing but likely to be a multi-billion Ringgit fund. Why else would the Governor be called to such duty?

In business circles, when we talk about creating an “Investment Panel”, it is understood that billions would be involved. I immediately had a bad feeling about this and decided to hold a press briefing.

 

Q. Who did you discuss your concerns about the amendments to the IRB Act? Who was most interested?

I spoke to a professor of public policy, who is a world renowned expert in fiscal matters. He was very surprised to hear about this approach. Within the party, I consulted with Rafizi Ramli (MP for Pandan) as this was a matter of national importance and he has a strong corporate and management accounting background. I alerted several Malaysia financial news editors and international ones including the Financial Times, Asian Wall Street Journal and Bloomberg. Most importantly, I contacted the international rating agencies. I thought they would be interested as it is a national fiscal issue, where tax revenues could be tapped at source and the Finance Minister could pursue more off budget projects. My immediate suspicion was that this looked like the proposed formation of the next 1MDB. In fact, the IPO clause might have seen the IRB Fund also being used to invest in the soon to be listed 1MDB.

 
Q. What was Barisan Nasional’s rebuttal or clarification? Do you accept what they say?

Three days after my press conference, the 2nd Minister of Finance made a statement, which was reported in Sin Chew that that no tax revenue would be used by the Investment Panel. He said that the IRB Fund would only comprise of moneys from 1.5% on tax revenues after deducting salaries, bonuses and operating costs of the IRB.

First, an important digression. This is the first time the BN government has confirmed what everyone has been suspicious about, that the IRB is being incentivized by a commission rate to collect more tax. According to the Minister, the current commission rate is 1.5% of total tax collected. We must remember that 1.5% rate is not law and it is not fixed by legislation. This rate could vary on executive orders, up or down.

Let me illustrate the point. This year the IRB targets to collect RM140 billion in tax. IRB will be paid a 1.5% commission rate on the collection; i.e. thus for 2014, the IRB will get RM2.1 billion for its operations and investments. There are 11,000 IRB staff. Do the math and you will see that for each officer, RM190,000 is spent on them for operational costs, salaries, bonus and investments. That’s why the IRB officers have been working extra hard.

Now back to the Minister’s point on the IRB Fund. The Minister is saying that the IRB Fund will come purely from the 1.5%. So after deducting salaries and bonuses and operating costs, the leftover is to be used for investment. So how big is this leftover? In 2011, (this is the latest figures publicly available) the IRB Fund for investments stood at RM255 million, all in fixed deposits with licensed banks.

So what the Minister basically said is that I was wrong in my allegations and that the Fund will continue to be relatively small at around RM255 million and that this is not a 1MDB sized type of fund. That this IRB Fund is merely a small fund for officers of IRB and thus not a big deal.

What the Minister said is not the full story. When I first read the bill, I saw the genius of the drafting for these amendments. Whoever drafted this is one smart fellow. The current section 23 of the Act, allows the IRB Fund to increase in size not only from internally generated commissions alone. So the IRB Fund is not just about the 1.5% commission.

Furthermore, it states that the IRB Fund could increase by way of receiving grants from the Finance Minister. The IRB Fund could also load up on debt. This really raised the eyebrows of senior KL bankers that I spoke to. The IRB Fund could also increase in size by virtue of a catch all phrase of “all other moneys lawfully received”. In other words, legally the Minister of Finance can increase the IRB Fund into the multi-billions.

That is the genius of the amendments, if you slack off as a lawmaker and just read the actual amendments, you will miss out the full picture. The key is to read the whole Act and put in context these amendments to the current sections. I read with great alarm that the IRB Fund could be the next 1MDB by using the existing section 23 combined with the formation of the Investment Panel and the powers to invest in anything under the sun.

Look, if the fund is really so small as stated by the 2nd Finance Minister, the Bank Governor will not get out of bed to attend an Investment Panel meeting. If the IRB Fund is so small, why go through the trouble of legislating to create an Investment Panel, why not just appoint a Chief Investment Officer in the IRB. Why must the Finance Minister take the trouble of making sure he has powers to appointing 6 out of the 7 Investment Panel members? Lastly, if the amendments are harmless, why did BN withdraw the bill?    

 

Q. Barisan Nasional has the numbers in Parlimen Malaysia to vote en bloc to approve any bill or amendment. Why do you think they held back from pushing through the amendments to the IRB Act?

Good question. Yes, BN has more than 51% majority (they have 60%) and could have easily pushed it through. What stopped the Finance Minister? Well I spoke to several BN backbenchers and urged them to be ready to do the right thing if push comes to shove. I also spoke to the Public Accounts Committee members and they were very concerned.

However Malaysian politics is extremely partisan. When push comes to shove, even the most “concerned” backbenchers will vote for the government. Since I started my term last year, I have not seen any BN backbenchers ever vote against the government. No abstention even. Not even during the vote on the new ISA provisions in the Prevention of Crime Act (PCA). I remember vividly how MCA had publicly said that they will vote against the PCA bill and a few days later, I saw all of the MCA MPs sheepishly stand to support the PCA bill. In other words, I don’t think Najib will give two hoots to what MPs like me think about his IRB amendments. I also don’t think he cares much for the views and opinions of his own Backbenchers.

So, I suspect the real reason why Najib withdrew this controversial bill must have something to do with questions raised by international financiers and rating agencies. PM Najib has proven to react and retract positions if it has international repercussions. This matter was picked up by Malaysian financial papers as well as international newswires. So when it comes to the international finance types, he sits up and listens.   

 

Q. Since you’ve been in Parlimen Malaysia, how many times do you think Barisan Nasional has pulled back in this way?

I can remember only once. The Prevention of Crime Act (PCA) was withdrawn when the heat was on. It was then reintroduced with superficial amendments in the following Parliamentary session and was just steamrolled through. So it is very important that we remain vigilant on this IRB bill when Parliament sits again in October. We need to start a solid campaign in September.

 

Q. Many people seem to think that your party, Parti Keadilan Rakyat (PKR) is the least organized among the Pakatan Rakyat opposition coalition. How did you come to identify this major issue ahead of the others?

Haha, are we the least organized? Well at the grassroots level, yes we have room for improvement. We are a truly multi-racial party so we find it more difficult to attract support. This country is very polarized, racially and older folks (with money) are more willing to support single race parties. Thank God the trend is changing slowly and as such PKR has seen steady growth in grassroots support in the last few years.

Let’s be blunt about this. Good organisation requires money and we don’t have any. So, to be fair, I think we are doing the best we can with limited funds. Most of our staff are severely underpaid and most are doing partial voluntary service. You can’t sack a volunteer for under performance.

As for the PKR MPs in Parliament, we are well organized. We have a pre-counsel every Monday lunch to discuss and portion out the bills to be debated. For the last session, I was assigned three bills, the Supplementary Budget bill, the IRB bill and the Anti Money Laundering and Anti Terrorism bill.

Anwar Ibrahim chairs our meetings and provides guidance and leadership. The Chief Whip, Azmin Ali (Gombak) is a capable organizer and is tasked to communicate to the Speaker and BN MPs. These behind the scene talks are crucial to ensure that Parliament functions properly. He is supported by his deputies, Sim (Bayan Baru) and Darrell (Penampang). Rafizi, Gooi, Laksmana Imran, Abdullah Sani, Dato Johari, Zuraida, Dato Idris, Hee, Jayakumar, Nurul Izzah, Dr. Azman, Dr. Tan, Manivanan and others are regulars at such meetings. Our think tank, headed by Ooi Heng prepares our talking points. My own office also has a dedicated researcher. Everyone gets a chance to speak and argue out points. It’s a little bit like being knights of the roundtable. It is a privilege. Meetings are filled with humour as MPs try to be witty. But, we do take the work seriously.          

How did I get to break the IRB story? Well pure chance, I volunteered to do it. Nobody had a chance to read it prior to the meeting since it was presented to us that very morning. So when the Whip asked who wanted to do this bill, there were no other takers. I volunteered since I worked on tax issues at the last Budget. I guess I lucked out. 

 

Q. How does the opposition coalition coordinate their strategy and tactics in Parlimen Malaysia?

There is no formal arrangement, except when something big happens. The chief whips of each party work together and coordinate on important matters. The whips also sort out the order of debate for Pakatan Rakyat. The only time the MPs from all sides get together are for events and presentations. We also work closely in crafting the Alternative Budget via the Pakatan Rakyat Secretariat, which is chaired by PKR. However, most strategy and cooperative planning are done on personal initiatives.  

Personally, I take the initiative to talk to my counterparts from Pakatan Rakyat. In the last session, my researcher and intern presented our findings on the Anti Money Laundering bill to 3 PAS MPs, 2 PKR and 1 DAP. I issued an open invitation and the 6 MPs responded.

The PKR office is on the 14th floor of the Parliament building and PAS’s office is also on the same floor. I would meet PAS lawmakers while waiting for the lift, which is notoriously slow. So in the 3 to 5 minutes waiting and being in the lift, we would discuss issues coming up for debate. It helps a lot that I grew up in Kelantan!

I also go to Parliament at 9 am. I usually have long breakfast meetings with another early bird, Raja Bahrin from PAS. Occasionally, I will also drop by the PAS Parliament office to catch up with Dr. Hatta, Khalid Samad and Mahfuz. I get on well with Dr. Hatta, he has a dry witty sense of humour, and he’s very smart. With DAP, I work closely with Charles Santiago on the TPPA and I am friends with Dr. Ko and Julian Tan (we are at the junior seating positions, at the farthest back corner away from the Speaker).       

 

Q. What is the quality of debating in Parlimen Malaysia? I hear that some of the new MPs are bringing a new approach?

Old school and new school debate differently. The old school guys can latch on a single point, most likely a controversial news item and milk it for 10 minutes. They have the gift of the gab. These are confident and gifted orators. Most speeches in Parliament last between 10 to 20 minutes. Occasionally, the Speaker will allow you to talk for 30 minutes.

I have also seen some MPs digress on policy debates. Last year, there was a bill to increase the fees and finance of Muzium Negara. It is a very simple, insignificant and non contentious bill. But to my surprise a lot of MPs stood to debate the matter. Back then there was a breaking news story about a contractor who destroyed a historical site in Kedah. I saw several MPs make a link of this hot news item to the fact that Muzium Negara had antiquities, so that “allowed” them a link to debate at length about the contractor’s desecration. No one talked about the actual amendments to the fee structure of Muzium Negara.     

Rafizi is pioneering a group of younger PKR MPs to actually stick to the point when debating. He was a debating champion in MCKK. I can’t speak for my fellow MPs, but I try to do thorough research before speaking. I will basically keep to the actual amendments and not digress too far. I use a simple speech structure: 1/3 focus on the history and social context of the bill, 1/3 on the actual amendments and their direct impacts and the last 1/3 on my critique of the bill and if any, suggestions for improvements.    

  

Q. There was a recent walk-out of opposition MPs. There are also a couple of MPs who seem to enjoy being barred from Parlimen. Some say it’s childish to shirk your duties in this way. Isn’t there a better alternative to such walk-outs and baiting?

The issue of Surendran and the Speaker seems to be something beyond a question of standards or professionalism. Many of us are beginning to feel that the animosity might now be personal in nature. I don’t think Surendran enjoys being suspended but he has strong views on how Parliament should be. A lot of us respect that, but it is not a very practical approach.

Most of us will work within the confines and challenges of the system. We have to be smarter and work harder to catch out the Ministers. Occasionally, like the IRB matter, we can actually swing views and win small victories. Ultimately, you are elected to serve your constituents. You have to choose your own path on how best to serve your community.

Walk-outs happen. When you are in Parliament, and you see grave injustice and one of your own brother MP is being persecuted, you don’t really think - you just react. There is no room for restraint or gentlemanly behavior in such instances. You are not at a society ball sipping tea, this is political warfare with the full might of the government bearing down on you.

The stress that Pakatan Rakyat MPs put up with, having our Parliamentary questions rejected, having to receive inane and deceptive answers from Ministers, having to put up with heckling without protection from the Speaker. All these builds up inside you. It builds up during the Parliamentary session, so by the time we reach the last day of the session, when suspensions are handed out, we are all in a foul and combative mood. So when an external event, such as the recent suspension of Surendran happens, and you are seeing all these injustices unfold, you react. There is a cathartic release of sorts in a walk out. It is a show of solidarity and a moment that binds all Pakatan MPs together, to remind us that we fight for fairness and justice. A walk out is probably the most civil action we can take. I think we are still very far from Taiwanese punch ups.  

Other interview: Thursday, June 5, 2014 - Interview: Wong Chen on electoral politics in rural Malaysia and Teluk Intan; http://khoryuleng.blogspot.sg/2014/06/interview-wong-chen-on-electoral.html

Eye on Modi's new India (update 3)

Following on Modi's great win in the India elections, I'm keeping a loose eye on what changes he's bringing to India, which has for decades been dominated by Nehru-Gandhi-Congress Party. Modi is expected to bring in some Gujarat business sense to things although he's been criticized on ethno-religious matters. He was apparently well funded by businessmen and rolled out a slick US presidential-style campaign plastering India with his posters.


19 June on price inflation controls

Nomura 19 June 2014, First Insights - India: Government takes proactive measures to keep food inflation in check,  Sonal Varma; Aman Mohunta; "Given the initial signs of food price increases from expectations of a below normal monsoon, the government yesterday announced the following measures to curb food price inflation (see India: Met department lowers it monsoon forecast, 9 May 2014):  Onions (~0.54% weighting in the CPI basket): The government has imposed a minimum export price (MEP) of USD300 per metric ton (MT) on onions to discourage exports and increase domestic availability. The state government of Delhi has been asked to supply onions through the government's retail outlets. A similar increase in the MEP was announced last year, although it failed to have a significant impact. However, a more proactive increase in the MEP could be more effective in controlling prices..."

14 June 2014 on new aircraft carrier:

Sea change: Prime Minister dedicates India's largest aircraft carrier INS Vikramaditya to the service of the nation By Rahul Kanwal Published: 23:44 GMT, 14 June 2014; "By choosing to come on-board the INS Vikramaditya in his first trip outside Delhi after taking the oath of office, Modi sent a message to sailors present on the ship and the world that was watching that military matters would be given top priority by his government....Why should we import defence equipment? We must be self-sufficient. Why can't we send our defence equipment to other nations?"  For officers and sailors used to the armed forces being neglected by the previous UPA government, PM Modi was a refreshing change.  Not only did he present a crisp salute during the Steam Past presented by the 11 ships of the Western Fleet of the Navy, he also reached out to the sailors and promised to make maritime security a national priority. Modi said, "Hum kisiko naa aankh dikhaayenge, naa aankh jhukaayenge, duniya se aankh milaa ke baat karenge (We will not try to intimidate other nations, neither will we bow before others, from now we will look every country straight in the eye and talk)." The PM linked economic progress to maritime security..." Read more: http://www.dailymail.co.uk/indiahome/indianews/article-2658139/Sea-change-Prime-Minister-dedicates-Indias-largest-aircraft-carrier-INS-Vikramaditya-service-nation.html#ixzz34fIaHRN1

Nomura research for 3 June 2014 :

First Insights - India: 100-day agenda and Modi’s top 10
100 day agenda
 Yesterday, Prime Minister Modi asked his ministers to come up with a 100-day plan, the following topics discussed as potential areas of reforms:
‪- Banking Holding Corporation: The finance ministry is mulling over a proposal to create an autonomous holding company for government stakes in various public sector banks (PSBs), and then to use that to raise fresh capital for the PSBs. As this is in line with the Nayak Committee’s (set up by the RBI) recommendations – to set up an investment company to hold the PSB stakes and to reduce government control of day-to-day operations – this should find favour with the RBI and likely made a priority, in our opnion.
‪‪- 100% FDI in defense: The ministry of commerce is proposing the removal of FDI limits to fund defense, in line with the BJP’s priority of indigenisation of defense production. With Arun Jaitley holding both the finance and defense portfolio, this is another potential reform that could be announced soon.

Nomura's research highlights for 27 May 2014 include:

First Insights - India: Modi details “minimum government, maximum governance” philosophy
Sonal Varma; Aman Mohunta; Last evening, Mr. Narendra Modi’s secretariat issued a statement from the Gujarat Bhawan on Mr. Modi’s views around “Minimum Government, Maximum Governance”. Key takeaways: Several smaller ministries will be consolidated into larger ministries for improved efficiency and coordination between departments. For example, as we highlighted in our previous note, the ministries of power, coal, petroleum & natural gas and non-renewable energy could be merged into a single ministry of energy. Similar consolidation is likely among the various transportation ministries.

Asia Insights - India: Modi’s lean team
Sonal Varma; Aman Mohunta; Narendra Modi and his team of ministers took oath in a ceremony attended by heads of the SAARC (South Asian Association for Regional Cooperation) nations. Key takeaways:
- A smaller team: Mr. Modi has cut the size of the council of ministers to 45 (23 cabinet ranked ministers, 10 independent ministers of state and 12 ministers of state) from more than 70 in the UPA II government.
 - Restructuring and consolidation: Several smaller ministries have likely been consolidated under the umbrella of a larger ministry with the aim of ensuring better co-ordination and efficiency. For instance, Piyush Goyal is likely to be in charge of coal and power, given the need for the two sectors to move in tandem. A lean cabinet will also mean greater accountability.

Interview #1: Presidential politics and Indonesian palm oil

We've been chatting with Malaysia and Singapore palm oil industry specialists and noticed significant interest in the upcoming Indonesia Presidential vote. Early in the week, we had the opportunity to talk to a Khor Reports reader who was interested to talk about it, and so we present to you this interview. 

Political changes can bring major shifts in resource development policies as well as a different approach to NGOs such as seen in Australia. On the buy side, in major consuming countries, we should note the rise of right wing nationalistic parties who gained more power especially in the European Parliament.

Interviewee #1: Indonesian voter, palm oil industry senor manager, who was part of the student demonstrations in the 1998 ousting of Suharto. A Jokowi supporter.

What do you think of the recent poll numbers?
What's an important issue in Indonesia elections?
What is Prabowo's plaftform?
What does Jokowi stand for?
How did the 9 June debate go?
What are the implications for Indonesia palm oil?
So there's concern in Indonesia about foreign influence amidst nationalistic feeling?

Click here to view: http://khorreports-palmoil.blogspot.com/2014/06/interview-1-presidential-politics-and.html

 

Johor-Iskandar & Malaysia power shifts (update 1)

I was seated at the window seat on a flight from KL to Singapore. Over southern Johore, the plane made a nice flyover from the western part over Tanjung Pelepas toward the eastern end of that part of the state. Just east of Syed Mokhthar's container port (and a bulking terminal across from it) was a lot of red-brown earth cleared areas for property development in the core Iskandar area. The same could be seen in the Danga Bay area between that and Johor Bahru town. Just north of that was suburbia with lots of homes laid out.

Just east of Johor Bahru were some red-brown earth scars of land leveled for building (but a lot less than in the core Iskandar zone) and further east were palm oil plantations and replantings of those areas. Toward the far eastern area was again large areas opened for development - presumably for RAPID. It was a great fly over, I wish the airline would have allowed me to take more than a few shots, but the policy is to switch off devices for the landing. 

It looks like Johore development is proceeding to complement 
Singapore's need for more northern space and arguably in competition with ports and oil and gas infrastructure.

 Flying over core Iskandar - Medini zone and Johore suburbia

What's hot in the news in Malaysia are some interesting moves for more participation in state administration by the Sultan of Johor. Other Malaysia states are in the news with recent kerfuffles in Terrengganu, about increased oil royalties and on East Malaysia. 

Some commentators are wondering about an apparent shift in state versus federal negotiation power. In opposition land, there are also questions on its leadership power over Selangor issues on water, controversial road construction, religious administration and more. At the recent Teluk Intan byelection, Chinese ruralfolk delivered a massive negative 15 percentage vote swing in a political revolt against the efforts of the DAP leadership. 

It would seem that traditional political leaders have lost some of their powers to state and local actors at this point of the political cycle. What next?


News links

Johor housing Bill to be amended; Updated: Sunday June 8, 2014 MYT 5:11:38 PM; http://www.thestar.com.my/News/Nation/2014/06/08/Johor-housing-Bill-to-be-amended/
NUSAJAYA: The Johor Housing and Real Property Enactment Board Bill 2014 will be amended to include a provision that the Sultan is to act on the advice of the Mentri Besar.... The amendment, which reads “role of the Johor Ruler is on the advice of the Mentri Besar”, was announced by Mentri Besar Datuk Mohamed Khaled Nordin during the state assembly sitting here, Sunday... Khaled said that other clauses in the Bill which mention the Johor Ruler would be changed to “state authorities”.... The Bill is expected to be tabled at the state assembly sitting on Monday....It had been reported that the Bill would empower the Sultan to appoint JHRPB members, oversee its accounts and also dissolve the board.... It is understood that the Johor Ruler would also be able to determine the remuneration of board members, approve the appointment of a director and pass the estimated expenses for each following year before seeking the state government’s approval for the allocations....

ECB unprecedented move on negative interest rates

This seems part of the "low political cost" policy recommendations from Krugman and others to take strong unorthodox measures to boost aggregate demand, to get the economy going back to growth from its rut. Read my posting on the Krugman talkbi attended here: http://khoryuleng.blogspot.com/2014/05/krugman-on-need-for-growth.html. Thus this might seem a belated move to many such economists.

I just had dinner with a friend who's a senior KL banker. She's a bit worried in the shorter term that the VIX volatility index is low, indicating market complacency. We talked about how it seems necessary to boost aggregate demand for employment creation and such; but the low rates policy of the last few years has just fed into non-productive sectors such as financial trading and investment, property and the like with nary a curb on the property sector in many countries. Thus, in Malaysia it seemed a good thing that BNM has been trying to curb the property sector - albeit with some major developers trying to be exempted e.g. in Iskandar Malaysia (here, there is talk of higher price hurdle for foreign buyers but I wonder if big property project owners will allow that).

I'm just a bit concerned about the unintended consequences of what is seemingly the extension of a well-intended policy. Policy making seems controlled by political-rich business interests. They have seemed hardly inclined to put in holistic policies to funnel all the QE money into the right direction. Are they doing things any differently this time with negative rates? The market neo-liberal hegemony is pretty strong.

I've been reading the latest Michael Lewis book, "Flash Boys" that talks about how smart people in the financial sector play and direct regulations to their benefit. I've been analyzing sustainability certification in commodity supply-chains - this is also another regulation that gets linked up with commercial interests. Regulations of increasing complexity benefit those who are able to figure them out and work them to their benefit i.e. mostly the richer companies. Do we end up with a better world as a result of this? In food regulation, I just read a Time.com piece that said that business interests have managed to get pizza defined as a vegetable in the US! Read this: How Sugar Went From a Condiment to a Diet Staple http://time.com/2812756/how-sugar-went-from-a-condiment-to-a-diet-staple/.

The common feature in all of this: well-intended policies seem to just keep getting hijacked by interest groups and big business. The outcomes end up rather unexpected if not even paradoxical.

I wonder whether this extension of a less than successful economic policy will get us nice job creation for the man in the street or whether it's just another round of asset price pumping for the rich. If the policy has not been well implemented, does escalating it work? Is the policy itself wrong? Is there a structural problem in policy making and more?

Hope it works out successfully in short time so we can get back to regular policy. Time for you all to go out and spend and invest in property, art, wine or whatever... just take your money out from the bank and get it moving ! Just so long as you're not an ageing pensioner...

Update, comment from reader who is from the Asian business sector: "yup.. we are in a crazy crazy world... borrowing money is now better than savings... the world's best brains are telling us all."

................

ECB Announces Measures to Boost Bank Lending
The European Central Bank said it will introduce a series of measures designed to boost bank lending and head off dangerously low inflation, after announcing a series of interest-rate cuts.
Among the initiatives announced by ECB President Mario Draghi were targeted long-term refinancing operations, which will give banks access to low-interest-rate loans.
The euro plunged to a four-month low against the dollar after the ECB announced the package, falling 0.7% to $1.3503 from above $1.36 before the central bank's rate cuts, while European stocks rose to a fresh six-and-a-half-year high.

source: Bloomberg.com

Bloomberg.com news links:

•  http://www.bloomberg.com/news/2014-06-05/draghi-unveils-historic-measures-on-deflation-threat.html
• http://www.bloomberg.com/news/2014-06-05/and-wake-draghi-yellen-split-to-revive-markets-banks-hypnotized.html
• http://www.bloomberg.com/quicktake/negative-interest-rates/

Interview: Wong Chen on electoral politics in rural Malaysia and Teluk Intan

An exclusive interview with Wong Chen, Parti Keadilan Rakyat*, Member of Parliament for Kelana Jaya, Selangor, 5 June 2014.

Some background and other views on Teluk Intan by-election here: http://khoryuleng.blogspot.com/2014/05/dap-suffers-loss-at-teluk-intan-by.html

*Parti Keadilan Rakyat is led by Anwar Ibrahim, the de facto leader of Pakatan Rakyat, the opposition coalition that includes the Democratic Action Party (DAP) and Parti Seislam Malaysia (PAS). DAP has long been Chinese controlled and oriented, and is strong in the urban sector, benefiting from malapportionment just as BN-UMNO benefits in the rural sector. PAS is an Islamic party and it is strong in NE Peninsular Malaysia. In the 13th General Election (GE13) on 5 May 2013, the opposition won the popular vote but BN-UMNO retained power, particularly by falling back into its semi-urban and rural strongholds, substantially losing power in the urban sector.

Q: Teluk Intan; what is your take on the semi-urban and rural voters?

First off, I wasn’t in Teluk Intan for the by-election. So my comments here are mostly based on news and feedback from politicians who were there. I also speak from my experience campaigning in rural Bentong, Pahang. 

I spent a year and half, from 2011 to 2012, working the ground. Bentong is about one hour north of Kuala Lumpur by highway. This is a semi-urban and rural constituency with similar demographics to Teluk Intan, with 47% Chinese voters, 42% Malay voters, 8% Indian voters and 3% Orang Asli voters. It is a large parliamentary seat with four state seats (DUNs) and several FELDA settlements. The bulk of the Chinese are in Bentong town along with a sizeable Malay population of civil servants. In addition there were also a lot of small rural Chinese villages. Indians were mostly living in rubber estates and in towns.

I campaigned everywhere, getting to know the imams, village heads, estate workers, Chinese local tai-kors. I organised friendly football games to get to know the youth in the Felda settlements. This attracted the entire village to come out to watch the game. I also attended weddings and funerals. I like to believe that I got to know the social structure of the place quite well. The first six months was exploratory and I fumbled around, but subsequently the villagers believed that I was there for the long haul and started to welcome my visits.
 

Q. It sounds like you were intended as potential “parachute” candidate. How did the local politicians take to that?

I was asked by PKR HQ to contest in Bentong, to take down the MCA leader (then deputy leader) Liow Tiong Lai. They chose me because I am a Chinese with a Kelantanese background. Liow himself is from Melaka. My Kelantanese creds was supposed to give me a swing of Malay rural voter support.

However, I found myself spending 60% of my time fighting local PKR and local DAP politicians who really disliked the fact that I was “parachuted in.” I was even physically threatened by some PKR people. It was all a bit funny, in retrospect. DAP and PKR in Bentong had been fighting tooth and nail for years over which party should contest in Bentong. My presence had united them. For the first time ever, they worked together- but to get rid of me!

In contrast, the PAS team was supportive and proved to be genuine ally in my efforts to engage with the people of Bentong. Eventually, this 2008 PKR seat went back to DAP in 2013 and Wong Tuck (not a relation) stood as the candidate and lost. I was sent to Kelana Jaya and won. I am happy to be serving in an urban area and I still have fond memories of my time in Bentong.
 

Q. How were you able to engage with Malay and Chinese voters in Bentong?

First, you need local introducers to take you to the people of influence. You need to make deep connections with them. Not just superficial ones. This can only be done by spending time to dine with them, attend their functions, and by talking to them one-on-one. Once you convince this person - be it the village head or local boss - that you are genuine, they will then take you to meet the village. It takes about three visits to break the ice.

Malay rural folk are shy at first. They are wary of strangers, more so than urban people. They have their own way of doing things – certain mannerisms and etiquette. They shake hands in a gentle way. I had to relearn a few basic things – to speak in a softer manner, not to be so direct, to eat with my hands, and to greet people in the proper manner. Since I am unable to talk much about Islam, I chose to socialise with them by playing football.   

In the rural Chinese villages, the local guys are quite rough, and I used a different approach. For the Chinese kampungs, I will walk into the local coffee shop and start debating. You need to have a straight forward approach when dealing with them. You need to swear, spit and laugh. On my second visit, the folks there bought me drinks. The bantering is crude but they liked the fact that I was extremely direct and unpretentious.
 

Q. What political logistical issues do you see in a semi-urban / rural constituency?

Time. You need a lot of time. And you need to use of a 4-wheel drive vehicle to get around. You need a driver and a team. Getting to a rural Felda settlement in Chemomoi took me 3.5 hours from KL. To-and-fro, that’s 7 hours travelling and you have 3 hours to do some work to engage the public there. So, when I didn’t have the support of Bentong local PKR politicians – it was hell. I was coming home way past midnight because the Malay kampong ceramahs start at 9pm, after prayers.

Clearly, you also need money – for the driver, car and team. Moreover, rural folks expect you to come with an entourage (“rombongan”) to prove that you are a big man and hence, electable. This means that you have to pay for three cars to accompany you. Initially I advanced money for fuel and food and nobody showed up! It is imperative to build a reliable local team. It took me close to a year to get the team together. So in the Teluk Intan case, and everywhere else, you cannot parachute in for two weeks and hope to win over the hearts and minds of the people.

 

Q. What do you think drives non-urban Chinese voting behaviour?

Chinese folk in Bentong are worried about their illegal land status. They worry about the prices of rubber and palm oil. Most are relatively comfortable – that’s why they haven’t left the village. They make decent income and they await the return visits of their children from the cities during holidays. They hardly interact with other races. And when they do, it is mostly on a friendly basis. They do not see national issues, such as Hudud to be a reality in their life. Conceptually they understand, but they do not see it as part of their world. Hence, I don’t think it is a deciding factor in their voting. More important to them are basic economics and wanting to maintain a peaceful life. They wile away their time with minor vices – mah jong and illegal 4D betting. Some like to fish. Most like to talk about politics – contrary to their laidback life, they are very well informed. So I would say economics first then other issues. In a non-contentious economic cycle year, then it all boils down to whether they like you or not.

Q. What are important issues for non-urban Malay voters?

In a candidate, they seek someone who is one of them – a local, a Malay of some standing and from a good family. I leveraged on the fact that my father is a Datuk. Therefore, they assume that I must come from an important family. A candidate with a large network of family ties will guarantee a rural win. So, if you don’t come from there, you better be the best friend of the guy there with the biggest family network.

Malay voters are also worried about palm oil and rubber prices. About 30% are religious and the rest are just normal folks. Most are also well-informed about national politics. A typical Malay Felda smallholder is in his early late 50s to 60s. He has Indonesian workers that he will send to work on his farm from 8am and pick up at 2pm. He is free to chat with other 60 year olds from 9am to 2pm every day. They are professional conversationalists. When I was there, the biggest topic was Sharizat’s cow scandal. They loved to hear my views and bought me drinks. They are generally a happy lot. They were earning around RM3,000 per month. Palm oil and rubber prices were good. The biggest impact that I made on them was to show them a video of the Bersih 2.0 rally with the police beating the protestors. At a ceramah, they requested that I replay the 3-minute video in a continuous loop, about 10 times. I believe they are not prone to sensational images, but I really connected with them on the basic issue of fairness and justice. They will elect you if they like you, and they will tell their friends to elect you. They liked a Chinese who could speak Kelantanese and could eat with his hands.

 

Q. Given your knowledge and experience of the above, how do you interpret the Teluk Intan by-election outcome?

Teluk Intan was a gamble by DAP. They have a national agenda to attract Malay members and voters en masse, contingent upon Dyana winning. Mathematically with a 7,300 majority, DAP should not have lost. The unintended consequence of this election is DAP had given a new lease of life to Gerakan, giving them a ministerial post to their president. 

Based on my own experience in Bentong, my suspicion is the local DAP team were not fully on board. They probably did not do enough to ensure her victory. This doesn’t mean that this was deliberate, but likely that there was not enough local buy in. Local folks are also suspicious of snooty urbanites telling them what to do. I suffered hell in my early months in Bentong only to find out 6 months later that I had not “asked permission” from local warlords in the proper manner. I was accused of “tak beri salam” before starting work in Bentong.

I personally believe that the DAP election team would have performed better under the guidance of the likes of YB Liew Chin Tong, who is humble, hardworking and understands rural folks. In GE13, he proved himself by capturing several Chinese rural seats in Johor.  

Being a parachute candidate, Dyana shouldn’t be supported by a parachute election team. Only the locals could introduce her and get her the needed support. She had a national image campaign and became a media darling. Unfortunately, the media fawning did not translate to localized support. So, the campaign team will have to bear responsibility. I thought she worked hard, kept her composure and smiled a lot. To really ensure rural victory, you just have to clock in the time with a slow-slow approach and you have to work on the personal touch. In other words, was Dyana embedded there months earlier, when YB Seah became very sick?

Q. Some people ask if rural Chinese are unable to vote for a young Malay girl. What do you think?

Sadly, racism and racist attitudes define Malaysia. The Chinese do not have an absolute moral high ground on this matter. It is pretty clear from the numbers that race was a factor. The Chinese majority seat will prefer a Chinese representative. Is that racism? If we turn the tables around, we have to ask if a Malay majority seat would want a non-Malay candidate.

But I don’t think rural folk are more prone to racism than urban folk. If DAP had fielded a well-regarded local Malay personality, someone from Teluk Intan, I suspect the results would have been better. Whilst the “local boy” factor does not mean much in the urban setting, it means the world in a rural setting.

I will venture to guess that Dyana’s Achilles heel emerged at the very late stages of the election campaigning – Perkasa. Her mother was exposed as a founding pro-tem committee member of Perkasa and Dyana herself helped her mother with memberships. I suspect that her initial denial and subsequent admission let a lot of DAP loyalists down. There was talk that the revelations shook the core cadre of the local machinery. After all, many KL-ites were also questioning her past and asking why no thorough background checks and/or early disclosures were made.
 

Q. Was Hudud a factor?

Hudud is being pursued by both PAS and UMNO via the so called joint study committee. Dyana was against Hudud. So if Hudud was a factor, logically she would have gotten more Chinese votes. For the Malay campaign, I was told that DAP relied heavily on PAS’s machinery. There was talk that PAS did not really want to support an anti-Hudud and non tudung wearing candidate. However, the numbers do not support this theory because the Malay votes actually increased a bit. I was told that the projected percentage Malay swing was 6% but she only managed half at 3%. I think it is somewhat unfair to blame PAS for this shortfall. Ultimately the DAP election team has to plan and execute according to the political landscape.

Rural folks and Hudud? Are Malay rural folks more religious? I really don’t think so. It is true that religion is a very big part of their lives but it does not necessarily translate to votes. If all rural folks were religious, PAS would be in Putrajaya today. Rural folks are primarily and largely economic driven. Whilst they are not buying Bursa stocks and pondering about derivatives, they worry about real economic issues of inflation, the price of fertilisers and what their rubber and palm oil will get them.

Q. What has the Opposition learned from Teluk Intan and how do you move forward?

We need to go back to basics. We need to defend our urban seats. This means good governance and better delivery. Walk the talk. Selangor needs to buck up. Most importantly, Pakatan Rakyat needs to stick together and not take divisive positions. It is crazy that having won the popular vote, we are now acting as if we had failed miserably in GE13.

Moving forward, to win Putrajaya, we need to win some 30 rural seats. Teluk Intan taught us a few things. Local candidates are best. Try not to parachute in a candidate for a rural seat. If you do, you need ample time to settle in. You need local support and in lieu of that, you need resources to build up a fresh election team. There are no real vote banks in Peninsular rural areas. That being the case, it means that all seats are in fact winnable. The team that plans well, works well and works hardest will win.

An exclusive interview with Wong Chen, Parti Keadilan Rakyat, Member of Parliament for Kelana Jaya, 5 June 2014.

Some background and other views on Teluk Intan by-election here: http://khoryuleng.blogspot.com/2014/05/dap-suffers-loss-at-teluk-intan-by.html

Khor Yu Leng has researched and written about the political economy of Felda and Johor-Iskandar and voting outcomes in GE13 (with a focus on rural voting behaviours). Some highlights here: http://khoryuleng.blogspot.com/2014/04/malaysia-political-economy-of-felda-and.html. These works will be published in an academic journal and two books in 2014-2015. She was Visiting Fellow at the Institute of Southeast Asian Studies in 2013. She is married to Wong Chen.