Monthly Archives: July 2012

5 posts

MCA’s new dilemma – how to work as opposition

(Also published on Malaysiakini)

Even though MCA is part of the BN ruling coalition at the federal level, it has many characteristics of an opposition party. A dilemma is having to choose between two options which seem equally unfavourable or mutually exclusive. Politicians and political parties in Malaysia often face such difficult choices.

For MCA, its ‘old’ dilemma was choosing between working quietly behind the scenes in the ‘shadow’ of its big brother, Umno, and risk being criticised by the community for being a compliant party, or speak out against certain government policies and risk offending big brother.

mca youth agm 011011 06But since the 2008 general election, a new dilemma for MCA has been introduced into the larger political landscape. And the recent debates between MCA president Dr Chua Soi Lek and DAP secretary-general Lim Guan Eng notwithstanding, MCA does not seem to have figured out how to solve this new dilemma.

What are the components of MCA’s new dilemma?

Firstly, it must start thinking of and structuring itself as an opposition party but this runs into the problem of admitting that it is, in fact, already an opposition party in many ways.

Secondly, if it is somewhat effective in its ‘opposition-like’ activities, especially in the Pakatan Rakyat-controlled states, this strategy can potentially backfire if these criticisms are redirected at the federal government, which has more power and resources compared to the state governments.

Let me elaborate on each component.

MCA a ‘de facto’ opposition party

Even though MCA is part of the BN ruling coalition at the federal level, it has many characteristics of an opposition party.

While MCA is still the second largest party within the BN with 15 parliament and 32 state seats (PBB has 14 parliament and 35 state seats but only has a presence in Sarawak), for the first time in Malaysian history, it has fewer parliament and state seats compared with the main opposition parties.

Even in the 1969 general elections, where MCA suffered a massive electoral setback, it still managed to win more parliament (13) and state (33) seats compared to its major rivals, DAP with 13 parliament and 31 state seats and Gerakan, 26 state seats.

azlanIn the 2008 general election, PKR won 31 parliament and 41 state seats while PAS won 23 parliament and 72 state seats. DAP, whom MCA considers its main political rival, especially in battling for Chinese votes, won 28 parliament and 72 state seats.

After the Perak defections, the Sibu parliamentary by-election and the Sarawak state elections, DAP now controls 29 parliament and 82 state seats, giving it slightly more than twice the number of elected representatives compared to MCA.

MCA’s representation in three states with a high percentage of Chinese voters – Penang, Perak and Selangor – has been significantly decreased after the 2008 general election. MCA has no elected representatives at the parliamentary and state levels in Penang, three MPs and one Adun (state assemblyperson) in Perak and only one MP and two Aduns in Selangor.

This drastic reduction in political representation requires an equally drastic shift in political strategy. MCA would be required to play the role of an opposition party in the Pakatan-led states of Penang and Selangor and to a lesser extent, Kedah (and Perak, prior to the change in government).

At the national level, its politicians needed to not only defend government policies in a more sophisticated manner but also to attack Pakatan on its policy platforms.

Unfortunately, MCA is structured in such a way that most of its members and leaders are much more used to service-oriented activities and having the resources of the state to carry out such activities.

It’s old guard, former and currently political representatives know of no other experience than to be part of the ruling coalition in the state and federal level. Hence, it is not that surprising that most of them cannot make that transition to the role of an effective opposition.

In fact, groups and politicians other than MCA have been more vocal and effective in their role as check and balance on the state governments in Penang and Selangor. The NGOs seem to be leading the charge against hillside development projects in Penang.

In Selangor, the Select Committee on Competency, Accountability and Transparency (Selcat) has played a more prominent active investigatory role into alleged abuses of power by the state government and agencies within the state government than any MCA politician.

NONEMCA’s shortcomings in playing the role of an effective opposition was most starkly revealed in the recent allegations by MCA’s Young Professionals Bureau chief Chua Tee Yong (left) of a RM1 billion land ‘scandal’ involving the Selangor state government and Talam Corporation.

When further details were uncovered, it was shown that this was actually an effort, spearheaded by the Selangor state government, to reclaim back debts owed to various state government agencies by Talam rather than the supposed ‘bailout’ as claimed by Chua.

Dearth of political talent 

Refutations against Chua’s allegations came quickly. The response which I found to be the most interesting (and witty) was given by none other than Talam itself (now renamed Trinity).

Some highlights include:

“Firstly, we would like to inform the deputy minister that Talam (as we were then) had purchase the said land in question from the state in 2001 at RM115,000 per acre and sold the said land to the state in 2010 at RM80,000 per acre. Common sense would dictate that it was Talam which was at a loss as opposed to the state.

“Further to the above, Talam had transacted 13 pieces of land as its settlement of debt with the state. The valuation of all 13 pieces of land (vetted and approved by Bursa Malaysia Berhad and Securities Commission) is RM685,230,000, but the transaction for the settlement of debt was only RM676,094,000. We are certain that the deputy minister is able to do elementary arithmetic to decipher if Talam was bona fide in its transaction for the settlement of debt.

“What the deputy minister failed to understand is the fact that all 13 pieces of land was deemed as one transaction towards the settlement of the debt due to the state. In fact, the deputy minister should applaud our conduct of having to give a discount on the overall value of the land as opposed to implying that we ‘cheated’ the state.

“In order to eradicate the learned deputy minister’s doubt pertaining to the veracity of the transaction, we are prepared to advertise in the local papers all the disclosures made pertaining to this transaction if the deputy minister is prepared to pay the cost.”

These erroneous accusations also led many to question Chua’s own capabilities as an accountant and former chief financial officer (CFO) of a government-linked company. The backlash against Tee Yong over this issue has significant repercussions on MCA as a political party.

Apart from the fact that Tee Yong is a son of the current MCA president, he was also touted as one of the more promising future leaders of the party, a well-spoken young professional that stood out from among the old warlords within his party.

NONEAlso not lost among some is also the fact that it was Tee Yong who led this attack against the Selangor state government rather than the MCA chairperson of the Selangor state liaison committee – Donald Lim – or another party leader in Selangor.

This inevitably leads to questions on whether the dearth of political talent in MCA is so severe, especially in an urbanised state like Selangor with politically sophisticated voters, that an ‘outsider’ like Chua had to be ‘imported’ for this mission.

As it is, MCA is caught in ‘no man’s land’, with a membership and leadership base that is used to being in positions of power with access to state resources but has to contend with an electorate, especially among the Chinese, which is increasingly demanding and to cope with the reality of decreasing power and influence at the federal level and being in the opposition in two economically and politically important states for the party.

Soi Lek a lone ranger?

Even if the MCA is somewhat successful in highlighting the inadequacies of the Pakatan-controlled state governments in Penang and Selangor, it can easily run into the problem that some of these criticisms may backfire on the BN federal government.

Take the issue of education. MCA has tried to blame the Selangor state government for not doing anything for Chinese schools in the state. But when it was shown that the state government has indeed set aside land for the construction of these schools, the tables were turned on the MCA since the building of schools is under federal jurisdiction.

NONESimilarly, MCA chief Dr Chua Soi Lek’s proposal during the second debate between himself and Lim Guan Eng that the Penang state government build more kindergartens could be easily turned on its head since publicly funded pre-school education is also under the jurisdiction of the federal government.

Interestingly, Soi Lek is currently occupying an advantageous position with regard to repositioning MCA. He is not a cabinet member or even a member of parliament, which means that he has more room to be ‘critical’ of certain BN politicians and policies.

He has done this on certain occasions, most recently hitting out at an Umno Johor Adun (Ayub Rahmat of Kemelah) for proposing that hudud be implemented for all Malaysians, not just Muslims.

The fact that he is not a cabinet minister also means he has more time to dedicate to party-related activities including the settling up of various 1MCA initiatives, such as the 1MCA Medical Fund and the 1MCA Micro Credit Loan Scheme.

He has also been very vocal in various forums in critiquing Pakatan policies, especially with regard to the policies outlined in the Buku Jingga, the opposition coalition’s common policy framework.

But he seems like a rather lonely figure among the MCA leadership. None of them, with the exception of his son, Tee Yong, seem to be aggressively supporting his critiques of Pakatan.

And the actions of certain MCA leaders which seem to grab the headlines are those which have to do with unsubstantiated allegations of extramarital affairs targeted at Penang Chief Minister Lim Guan Eng rather than with more substantive critiques involving important issues of the day.

This kind of strategy will likely backfire on the MCA, especially given the already proven scandal involving Soi Lek.

Needed: Tan Keng Liang 2.0

One person who has been successful in solving this ‘dilemma’ is Gerakan’s Kedah Youth chief Tan Keng Liang (photo below). He is clear on this primary role – which is to be an opposition politician in the Pakatan-controlled state of Kedah.

NONEHe has exposed various ‘scandals’ associated with the Kedah state government and so far, has not suffered the same kind of backlash as Tee Yong’s Talam ‘revelations’. Sometimes, he makes slight geographical shifts in order to criticise the Penang state government for not having open tender for certain projects, such as the WiFi initiative in the state.

More importantly, he has been successful in raising both his profile as well as that of the issues which he champions to the national level. And he has done this by employing a variety of channels including via social media so much so that he has been given the tag of a Twitter ‘sensation’ by a member of the media. (He has close to 24,000 followers on Twitter compared to less than 3,000 followers for Tee Yong).

What MCA needs in order to partly solve its new dilemma is to have more Tan Keng Liangs within the ranks of its younger leaders. Or more specifically, newer versions of Tan Keng Liang, who are equally dogged in their exposes of wrongdoing on the part of Pakatan-led state governments but who are also sophisticated and strategic in their critiques of some of the BN policies at the federal level.

It needs more people like Eric Choo (who tweets @choows), a Malacca-based lawyer who was the former president of MCA UK and a regular contributor to the Loyarburok blog (www.loyarburok.com) as well as MCA Youth Education Bureau chief Chong Sin Woon (who tweets @chongsinwoon), who has publicly advocated for racial quotas for the matriculation programme to be abolished.

Of course, MCA is not the only BN component party to face this dilemma. Umno, for example, cannot figure out how to lead an effective opposition coalition in the state of Selangor, partly because of the presence of many factions within the state and partly because of the lack of capacity on the part of some of these state leaders.

In Penang, it took the BN more than three years to replace Koh Tsu Koon as its leader and even then, there still seems to be a lack of coordination between the BN among the Penang state and federal leaders.

Ultimately, this new dilemma can only be solved at the structural level when the BN falls out of power at the federal level. When this happens, it will be the turn of the Pakatan parties to face its own sets of dilemmas. But this discussion is for another article at another time.


Dr ONG KIAN MING holds a PhD in Political Science from Duke University. He is a lecturer and political analyst at UCSI University.

Dissecting the ETP Annual Report (Part 4): 45pc of GNI and 20pc of jobs disappeared in ‘recalibration’

(Also published on The Malaysian Insider)

‘Massive revision’ better describes the loss of GNI (Gross National Income) and jobs. In the ETP Annual Report, PEMANDU glossed over the changes when it ‘recalibrated’ the investments, GNI contributions and job creation numbers of the various entry point projects (EPPs). But the changes are enormous. RM107.7 billion of GNI and 75,000 jobs equivalent to 45 per cent and 20 per cent of the respective original forecasts were written off.

Did some EPPS fraudulently exaggerate their potential impact?

Changes of 5-10 per cent can be accepted as ‘recalibration’ in the normal course of changing business conditions. But a whopping 45 per cent reduction in GNI contribution means that the original forecast was nearly double the level that is now considered realistic. It appears that some EPPs had presented forecasts that extremely exaggerated their potential.

The much-vaunted ETP labs failed.

PEMANDU makes much of the ‘labs’ that chose these EPPs that will supposedly take us to high-income status. But it is now clear that PEMANDU’s highly-qualified professionals and expensive consultants failed to detect mammoth discrepancies and exercise sufficient due diligence. Were these EPPs with exaggerated forecasts chosen instead of other projects which were more realistic and honest?

What remedial action is PEMANDU taking?

The lack of explanations and disclosure by PEMANDU on such massive changes is shocking. What type of jobs disappeared? Which projects severely overstated their contributions? And most importantly, what remedial action is PEMANDU taking to make up for these chasms?

PEMANDU shrugged off the disappearance of RM107.7 billion of GNI (Gross National Income) and 75,000 jobs as ‘recalibration’.

The 45 per cent downward ‘recalibration’ in GNI contribution means the original GNI forecast was nearly double the level that is now considered realistic. Were projects with wildly exaggerated forecasts chosen as EPPs instead of others with more realistic and honest assessments? PEMANDU should explain the issues and remedial measures taken instead of glossing over these massive changes.

For those who have come in late … 

So far in our dissection of the 2011 Annual Report   of the Economic Transformation Program (ETP ):

1. Part 1 (The ‘D’ata in our DEEDS framework) highlighted how PEMANDU very adroitly masked the fact that real national income growth last year was below its target;

2. Part 2 (The ‘E’xecution in DEEDS) unearthed the shocking case of PEMANDU taking “100 per cent” credit in its Annual Report for a RM1.9 billion wafer fab plant that was never actually built; and

3. Part 3 (The ‘E’nterprise in DEEDS) uncovered the startling gap between committed and actual investments. The RM12.9 billion of actual investments is a mere 7 per cent of the RM179 billion committed investments that PEMANDU prefers to emphasise.

Diversity – where was RM107.7 billion of GNI lost? 

Part 4 today was supposed to have focused on Diversity of the ETP (the second ‘D’ in DEEDS). How spread out are the various entry point projects (EPPs) and new jobs across the 12 NKEAs? However, this analysis is now impossible as PEMANDU has dramatically revised down key figures in the ‘recalibration’ disclosed in the ETP Annual Report without offering adequate explanations:

1. The GNI (Gross National Income) contribution of the EPPs was slashed by RM107.7 billion, a massive 45 per cent plunge from the RM237.2 billion level reported in November 2011;

2. In the very same ‘recalibration’ exercise, 75,000 jobs equivalent to nearly 20 per cent of total jobs disappeared.

These massive changes raise troubling questions over the due diligence exercised by the highly-qualified staff and expensive consultants at PEMANDU. Changes of say, 5-10 per cent, can be accepted as ‘recalibration’ in the normal course of changing business conditions. But a whopping 45 per cent change suggests a serious failure when selecting the supposedly transformative Entry Point Projects (EPPs) that would take us to high-income status by 2020.

Were projects with more conservative, but realistic GNI and jobs forecasts overlooked in favour of those that inflated their numbers? How do these ‘recalibrations’ affect the overall ETP goals? We delve further into these issues in this Focus Paper.

‘Recalibrated’, but what were the original numbers?

“For the 2011 Annual Report, we engaged PricewaterhouseCoopers (PwC), an independent audit firm, to conduct a series of Agreed-Upon-Procedures (AUPs) to ensure the accuracy of our reporting. During the course of the AUP, we recalibrated the committed investments, projected GNI contribution in 2020 and projected jobs created.”- pg 8, ETP Annual Report

On the surface, the above sounds quite sensible and innocuous. One might even say PEMANDU deserves praise for engaging an independent audit firm; and for fine-tuning its investments, Gross National Income (GNI) and job creation numbers following input from the audit firm. PEMANDU went on to say:

“The recalibration has resulted in a revised committed investment of RM179.2 billion, GNI of RM129.5 billion and 313,741 new jobs. This rigorous exercise is extremely useful to help us establish clear accounting and best practices that will ensure greater accuracy as we move forward.” (emphasis is as per the ETP annual report)

However, as we have discovered all too often with PEMANDU and the ETP, things are quite murky under the slick façade. Given the importance of this recalibration exercise, it is only reasonable to expect PEMANDU to show the details of the changes in figures and explain where and why these changes occurred. However, PEMANDU tells us only what the recalibrated investment, GNI and jobs created figures are. Nowhere in the Annual Report does it state what the original figures were, and it offers a mere one paragraph explanation for the ‘recalibration’.

It would not matter so much if the ‘recalibration’ had involved minor changes. However, as the numbers show, the ‘recalibration’ could better be described as a ‘massive revision’. Based on our analysis, the ‘recalibrated’ GNI contribution is 45 per cent less than before, and the number of jobs is down by 20 per cent. ‘Massive revision’ is a better term than ‘recalibration’

GNI down by 45 per cent; number of jobs down by nearly 20 per cent

Table 1 below shows the extent to which the investment, GNI and jobs created figures were ‘recalibrated’. Note that the downward ‘recalibrations’ for GNI contribution and jobs created were massive:

• GNI contribution was almost halved from RM237.2 billion to RM129.5 billion, a decrease of RM107.7 billion or 45 per cent;

• Jobs created were revised down by nearly 20 per cent or 75,522 jobs.

Table 1: ‘Recalibration’ resulted in loss of RM107.7 billion of GNI and over 75,000 jobs

Figures in Nov 2011

Recalibrated Figures in ETPAnnual Report

Difference

Change in %

Investment

RM177b

RM179b

+RM2b

+1.1%

GNIcontribution

RM237.2b

RM129.5b

-RM107.7b

-45.4%

Jobs created

389,263

313,741

-75,522

-19.4%

Source: 2011 figures as reported in ETP new projects bring total committed investments to RM177.1bil. Yvonne Tan, the Star 11 Nov 2011  .

PEMANDU explained away these massive revisions in one paragraph:

“The revision of the investment and job creation numbers is primarily due to changes in business plans over the next five years, in tandem with changing business dynamics. In addition, there is a significant revision in the GNI forecast. Being a relatively new concept, most corporations struggled with it.”- pg 9, ETP Annual Report

The lack of disclosure is appalling. Given the magnitude of these ‘recalibrations’, it is perfectly reasonable to ask which Entry Point Projects (EPPs) and National Key Economic Areas (NKEAs) were most affected.  In plain language:

1. Where did the 75,522 jobs disappear from? What type of jobs were these? High, low or middle-income, and in which EPPs?

2. How was RM107.7 billion of GNI lost? Which EPPs and NKEAs were most affected?

3. And most important of all, what remedial action is PEMANDU taking to make up for these chasms?

Did some EPPs fraudulently exaggerate their forecasts?

There is an even more important issue which affects the very foundations of the ETP.  Did some EPPs intentionally overstate their GNI and jobs contribution impact? We conjecture that some must have. Changes of say, 5-10 per cent, can be accepted as ‘recalibration’ in the normal course of changing business conditions. But a whopping 45 per cent change suggests that at least some EPPs fraudulently overstated their impact on GNI.

Were these EPPs then selected instead of other projects which were more honest and realistic in their projections? This again brings to the fore serious questions on the much-vaunted lab process at PEMANDU and how transformative the EPPs really are.

Or did PEMANDU fail badly in its due diligence?

PEMANDU says the downward reduction in GNI is because some corporations “struggled” with this “relatively new concept”. We have already had dialogues with PEMANDU over its preference for quoting GNI instead of the more commonly used GDP (Gross Domestic Product), and its obfuscation between GNI and GDP when presenting its economic impact. Now, the GNI contribution forecast has been revised down by nearly half. Or put another way, the GNI forecasts made by the EPPs were nearly double what they should have been.

Granted, some corporations “struggled” with this new concept, but surely PEMANDU’s team of highly-qualified professionals should have some sense of the magnitude of the projections made. Surely they should have detected that the GNI claims made by these EPPs were double the numbers that were reasonably feasible, and helped these corporations that were struggling to present more realistic numbers rather than accept the grossly exaggerated claims.

While corporations might have some excuse in unfamiliarity with GNI, the same excuse is not valid for job projections. It is normal project management procedure to identify the manpower requirements to complete a project. Of course, we do not expect 100% accuracy. But a slashing of nearly 20 per cent suggests some very major embellishment in the original forecasts which PEMANDU and its expensive consultants failed to detect.

To clear the air, PEMANDU should disclose in detail the changes in GNI and job creation claimed by each individual EPP.  This information should be readily available. As PEMANDU said on page 250 of the ETP Annual Report:

“PEMANDU engaged PricewaterhouseCoopers (PwC), an independent third party, to conduct a series of agreed-upon procedures. This work includes agreeing the information and data inputs used in the determination of selected reported KPIs and the 2020 GNI, investments and 2020 jobs created statistics, to information provided by the EPP sponsors and Project Owners…

… Over the course of this exercise, PwC’s findings highlighted a number of exceptions, which have been subsequently addressed and reflected in the Annual Report. The PEMANDU team has since applied these procedures to the remainder of the projects to ensure that the appropriate rigour and discipline is used in determining the ETP’s results in 2011.”

If these rigorous procedures were indeed followed for each of the 110 projects announced under the ETP Progress Updates, then surely PEMANDU should have no problems publishing the individual investment, GNI contribution and jobs created figures for each EPP and explain any changes, especially in terms of GNI contributions and jobs created.

Such information would also be very pertinent to the participants in the labs who presented projects for consideration but which were ultimately not accepted as EPPs. Did their projects get a fair chance? Were their projects jettisoned in favour of others that presented much more rosy but unrealistic forecasts which, as we now see, have had to be dramatically scaled back?

Are the ETP’s original targets still intact? 

The ETP, as originally detailed in the ETP Roadmap published in October 2010, calls for:

• 131 entry point projects (EPPs) ;

• within 12 National Key Economic Areas (NKEAs);

• which will pour RM1.4 trillion worth of investment into the economy;

• create 3.3 million new jobs; and

• contribute RM800 billion of incremental GNI by the year 2020 .

Now, in the very first year of implementation, RM107.7 billion of GNI and 75,522 new jobs have been wiped out.  PEMANDU has been silent about how it intends to close these chasms in order to meet the overall final targets by 2020.

And has the ETP become even more mega-project and oil-and-gas dominated?

Note from Table 1 that the committed investments amount bucked the trend, rising by RM2 billion despite the downward ‘recalibrations’ in GNI and jobs. We suspect that upward revisions for the MRT project compensated for downward adjustments in the private sector EPPs . If so, this would mean an even greater reliance on public (government) investments, which is the polar opposite of the private sector investments that the ETP is supposed to promote.

Coupled with the potential problems at some high profile private sector EPPs which we highlighted in Parts 2 and 3 of this series, our fears that the ETP is currently being dominated by mega-projects and the oil, gas and energy sector are heightened rather than assuaged.

We call on PEMANDU to share the original and ‘recalibrated’ figures for each EPP. This will allow analysts and interested parties to keep track and be assured that the diversity and mix of the NKEAs in terms of investment, GNI contribution and jobs created is still in accordance with the ETP’s original targets.

About DEEDS

Earlier this year, we published a series assessing PEMANDU and the ETP on the goals, plans and targets stated in the ETP Roadmap document. To facilitate constructive discourse and in keeping with the spirit of the alphabet soup of NKEAs, NKRAs, SRIs, EPPs, and GNI surrounding the entire GTP, we evaluated PEMANDU and the ETP on its DEEDS – Data transparency, Execution, Enterprise, Diversity and Socio-Economic Impact. The 8 Focus Papers in this Critique of the ETP Series, together with related infographics and a powerpoint presentation can be found at www.refsa.org.

*Visiting contributor Dr Ong Kian Ming holds a PhD in Political Science from Duke University and Economics degrees from the University of Cambridge and the London School of Economics. He is attached to UCSI University, which has been named as the project owner of two entry point projects (EPPs). To avoid any potential conflict of interest, he will not make references to or analyse these two EPPs. 

*Executive Director Teh Chi-Chang holds a first class degree in Accounting & Financial Analysis from the University of Warwick, an MBA from the University of Cambridge and the CFA (Chartered Financial Analyst) charter. Prior to joining REFSA, he headed highly-regarded investment research teams covering Malaysia, and was himself highly-ranked as an analyst. 

Read Dr. Ong’s critiques of the ETP in full here.