• Minister in charge of the Economic Planning Unit (EPU), Abdul Rahman Dahlan, should ask for a statistics lesson from the Department of Statistics rather than asking the Khazanah Research Institute (KRI) to explain their latest report to the Perak state government

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 5th of September, 2016

    Minister in charge of the Economic Planning Unit (EPU), Abdul Rahman Dahlan, should ask for a statistics lesson from the Department of Statistics rather than asking the Khazanah Research Institute (KRI) to explain their latest report to the Perak state government

    It was reported yesterday that Minister in charge of the Economic Planning Unit (EPU), Abdul Rahman Dahlan, had said that it was “unreasonable” and “not logical” for the Khazanah Research Institute (KRI) State of the Households II Report to place Perak as the 2nd poorest state in Malaysia.[1] It was further reported that the Minister had said that reports and statistics which are accurate needed to be supplied to KRI so that its report can be corrected.[2] Abdul Rahman also said that he had directed the EPU director general to call for a meeting between KRI and the Perak government to explain the statistics in the report.

    I am truly appalled at the ignorance of the Minister in charge of the EPU as demonstrated by his statements on the KRI report.[3] The data showing that Perak had the 2nd highest percentage of households earning less than RM6000 a month was obtained from the Household Income and Basic Amenities Survey 2014 which was carried out by the Department of Statistics (See Chart and source below).

    The same Household Income and Basic Amenities Survey also shows Perak having the 2nd highest number of households earning less than RM2000 a month at 21.3% (after Kelantan at 31.4%) (See Figure below)

    Source: Household Income and Basic Amenities Survey 2014, Department of Statistics

    Abdul Rahman Dahlan may be right in saying that Perak may not be the 2nd poorest state in Malaysia since there are other ways of measuring income per household or per person such as mean and average household incomes (Perak comes in at 3rd from the bottom in 2014) and median wages (7th from the bottom in 2015) and average wages (5th from the bottom in 2015).

    But to question the KRI report which is based on statistics sourced from the Department of Statistics (which is under the Minister in charge of the EPU’s purview, the last time I checked) shows a level of ignorance and incompetence that is astounding, even by Abdul Rahman Dahlan’s standard.

    Instead of asking the DG of the EPU to call for a meeting between KRI and the Perak state government, the Minister should instead ask the Department of Statistics to brief him on the Household Income and Basic Amenities Survey 2014 and how to understand the statistics in this survey. In fact, I am confident that one of the Perdana Fellows interning under the Minister can brief him on the basics of statistics and how to understand such reports.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    Department of Statistics – Household and Income Survey 2014

    Khazanah Research Institute – The State of Households II

    [1] http://english.astroawani.com/business-news/khazanah-report-perak-unreasonable-rahman-dahlan-115860 and http://www.bernama.com/bernama/v8/bm/ge/newsgeneral.php?id=1279527

    [2] http://www.utusan.com.my/berita/politik/rahman-sangkal-laporan-perak-negeri-miskin-1.378193#sthash.Bx2Z3e9D.dpuf

    [3] http://www.krinstitute.org/assets/upload/KRI_State_of_Households_II_280816.pdf

  • Mismatch in demand and supply of civil service positions shows that many Malaysians have not escaped from the middle income trap

    Media Statement by Dr. Ong Kian Ming, Member of Parliament for Serdang, on the 24th of August 2016

    Mismatch in demand and supply of civil service positions shows that many Malaysians have not escaped from the middle income trap

    When the Economic Transformation Program (ETP) was first launched in 2010, one of its key performance indicators was the creation of an additional 3.3 million jobs by 2020 over 60 percent of which will be in the medium-income or high income salary brackets. Last week, PEMANDU CEO, Datuk Seri Idris Jala, was reported as saying that Malaysia has moved out of the middle income trap.[1] A deeper analysis and understanding of some of the job figures say otherwise.

    If the ETP was successful in creating a vibrant and growing economy that is driven by the private sector, this should result in the creation of many desirable and well-paying jobs in the private sector. But according to figures released by the Public Service Commission (or Suruhanjaya Perkhidmatan Awam (SPA)), the demand for public sector jobs is at an unbelievable high level and far outstrips the supply of such jobs.

    From 2011 to 2015, the SPA received more than 1 million applications for jobs in the civil service. This figure reached a high of 2.1 million in 2013 before falling to 1.59m in 2014 and increasing to 1.63m in 2015 (See Table 1 below). These are very high figures especially considering that the number of civil servants in Malaysia was 1.6m in 2015. While jobs in the civil service will continue to be desirable because of job security and other perks (such as medical care, various allowances and government pensions), this high demand is an indicator that the private sector is not offering enough well-paying jobs to stem the demand for public sector jobs.

    What should be equally worrying is that the number of civil service jobs being offered has decreased from 46,503 in 2011 to 30,964 in 2015. This means that only a small handful of applications are successful in entering into the civil service and this % has decreased from 4.1% in 2011 to 1 mere 1.9% in 2015. This raises the question of what jobs the unsuccessful applicants end up doing.

    Among those successful applicants, a majority (plurality, in some years) of them have only up to a certificate level qualification at most. For example, in 2015, 54% of the successful applicants were hired for jobs which required only a PMR, SPM or Certificate level qualification (See Table 2 below).

    This is a clear indicator that those who desire civil service jobs the most are also those with the lowest qualifications. This is not surprising given that many jobs at the bottom of the economic ladder have been taken up by foreign labour. The only place where foreign labour cannot hold jobs is in the civil service, hence the high number of applications and also appointments at this level.

    This can be seen from the statistics from job application for specific jobs which are taken from the Public Service Commission website.[2] Chart 1 shows the applications and appointments for the position of a general assistant at the Grade 11 level which pays approximately RM1200 as a monthly salary and requires a minimum of PMR as an academic qualification. There were 87281 applicants for 16 positions (0.02%).

    Chart 2 shows the number of applicants and appointments for the position of a food preparation assistant at the Grade 17 level which pays approximately RM1400 as a monthly salary and requires a minimum of SPM as an academic qualification. There were 65041 applications for 24 positions (0.04%).

    Chart 3 shows the applications and appointments for the position of an IT officer at the Grade 41 level which pays approximately RM2300 a month and requires a minimum of a degree as an academic qualification. There were 17895 applicants for 61 positions (0.34%).

    Charts 1 to 3 shows that the demand for public sector jobs far outstrips supply and that the mismatch between demand and supply is at its most acute at the level which requires the lowest academic qualification.

    From a GDP per capita standpoint, Malaysia may have escaped the middle income trap. But those who have benefitted from this increase are the top 20% to 30% with high wages and also businesses which earn large profits but don’t share their earnings with their workers, especially those at the bottom of the ladder.

    For the bottom 40%, the struggle to get out of the middle income trap continues and many of them are still hoping to obtain the security of a public sector job which are becoming more and more scarce.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    Chart 1: Applications for General Assistant Grade 11

    Chart 2: Applications for Food Preparation Assistant N17

    Chart 3: Applications for an IT officer Grade 41

    [1] http://www.thestar.com.my/business/business-news/2016/08/17/idris-jala-malaysia-no-longer-in-middle-income-trap/

    [2] http://online.spa.gov.my/online/index.php. It is possible that some of the applicants would have applied for multiple jobs thereby inflating the application statistics e.g. people who apply for the N41, N17 and even N11 jobs. If this was the case, it would only highlight the lack of opportunity in the job market if even those who are qualified to apply for graduate level entry positions would also want to apply for positions which only require a SPM or PMR qualification.

  • Possible appointment of Tan Sri Dr. Irwan Serigar as the next Bank Negara Governor raises concerns

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 14th of March, 2016

    Possible appointment of Tan Sri Dr. Irwan Serigar as the next Bank Negara Governor raises concerns

    I read the disturbing news reported by the Wall Street Journal on Saturday that Tan Sri Dr. Irwan Serigar bin Abdullah, the current Chief Secretary of Ministry of Finance, will be named as the new Central Bank Governor of Malaysia after Tan Sri Zeti Akhtar Aziz.[1]

    I want to raise some concerns regarding Dr Irwan’s role in multi-billion ringgit debts of Pembinaan PFI Sdn Bhd, a 99% Ministry of Finance owned company. Pembinaan PFI first rose to prominence when the 2013 Auditor General’s report showed that it had accumulated liabilities of close to RM28 billion at financial year end 2012, putting it only behind Petronas and Khazanah among government owned entities (See Figure 1 below).

    Figure 1: Three government owned companies with the highest amount of liabilities in financial year 2012

    Source: Auditor General’s Report 2013

    Dr. Irwan was appointed to the board of Pembinaan PFI in 2012 when he was the Deputy Secretary in charge of policy in the Ministry of Finance (MoF). After he was promoted to Chief Secretary of the MoF, Dr. Irwan remained as a director of Pembinaan PFI.

    The Auditor General’s report prompted a Parliamentary Accounts Committee (PAC) investigation into Pembinaan PFI. The PAC report was released in March 2015, a copy of which can be downloaded from the parliament’s website.[2] The testimony of the witnesses, including Dr. Irwan, clearly showed the spending incurred by Pembinaan PFI is nothing more than a creative way to hide development expenditure from the official budget and in doing so, artificially keep Malaysia’s debt to GDP ratio at below the 55% mark. Pembinaan PFI is not funding expenditure through private finance initiatives (which its name implies) since there is no private money involved in these projects.[3]

    Indeed, during the PAC meeting, Dr. Irwan admitted as much when he said the following to the Chairman of the PAC:

    “Ini Tuan Pengerusi, your understanding is very clear. That you know this is off-budget. It doesn’t come in to the government so that why you know our debt level and rating and everything we can maintain.”

    Dr. Irwan’s role in relying on off-budget expenditure items in order to maintain our official debt levels and ratings raises concerns about his responsibilities as the next Bank Negara Governor. Will he also rely on creative accounting for other sensitive economic data such as BNM’s official reserves? Will he paint an unrealistically positive account of the Malaysian economy via BNM’s economic reports and fail to flag areas of concern such as the possibility of a growing fiscal deficit?

    When asked by The Edge TV on the specific issue of Pembinaan PFI, Dr Irwan gave a misleading answer.[4] He likened the projects under Pembinaan PFI with the MRT project, stating that the payback period is over a very long horizon while in actual fact, most of the projects under Pembinaan PFI are not capable of revenue generation. This kind of obfuscation is also worrying especially during these economically challenging times when clarify of thought and explanation are needed in order to assure the jittery markets.

    The markets are looking for a steady pair of hands to replace Dr. Zeti as the next BNM governor. Any of the three current Deputy Governors would have sent a strong signal to the markets that the independence of BNM will be maintained. The appointment of Dr. Irwan, if true, does not give any reason for the markets to be assured and in fact raises more questions about the independence of our central bank moving forwards.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    [1] http://www.wsj.com/articles/malaysia-finance-ministry-official-to-be-new-central-bank-chief-1457721640

    [2] http://portal.parlimen.gov.my/ipms/modules/risalat/res/risalat/2015/Laporan%20Jawatankuasa%20Kira-Kira%20Wang%20Negara%20Parlimen%20Ketiga%20Belas%20-%20Prosedur%20Kawalan%20Pengurusan%20Syarikat%20Pembinaan%20PFI%20Sdn%20Bhd%20(Kementerian%20Kewangan).pdf

    [3] The building of schools, for example, is usually financed through the development expenditure of the government budget. The projects, including the building of schools, financed through Pembinaan PFI, are all off-budget expenditure items which means that the government doesn’t have to officially borrow money to finance these projects. Pembinaan PFI, as a 99% MoF owned company, borrowed the money from EPF and KWAP. The Malaysian government has to help Pembinaan PFI service these loans to EPF and KWAP through its operating expenditure or OPEX.

    [4] https://www.youtube.com/watch?v=6HlN7ygkN-c

  • Disappointed that the Minister of International Trade and Industry (MITI), Mustapha Muhamed, failed to take up my challenge to set up a special parliamentary committee to monitor the implementation of the TPPA

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 27th of January, 2016

    Disappointed that the Minister of International Trade and Industry (MITI), Mustapha Muhamed, failed to take up my challenge to set up a special parliamentary committee to monitor the implementation of the TPPA

    During my speech on the TPPA this morning, I challenged the Minister of International Trade and Industry to set up a special parliamentary committee to monitor the implementation of the TPPA during the 2 years leading up to possible ratification after the TPPA is signed on the 4th of February, 2016.

    Unlike other Free Trade Agreements (FTAs), the TPPA will involve 27 amendments for 17 acts before it can be ratified by the participating countries. This special parliamentary committee would have monitored and given input for these amendments in order to ensure that they are consistent with international best practices. It would also have monitored changes in rules and procedures under the various ministries which do not require parliamentary approval. It would also have played the role of ensuring that the certification process which will be conducted by the United States is done in a way which is fair and does not privilege special interests which may try to influence the process. Finally, this committee should have the power to recommend to the Minister that Malaysia pull out of the ratification process if they find that it is not in the best interests of our country to go through with the TPPA.

    Sadly, in his winding up speech, the Minister failed to even address this suggestion. This means that the process of ratifying the TPPA would be done in a less than fully transparent and accountable manner. This would undo much of the credibility which the Minister and his Ministry has built up through their public engagements to explain the TPPA.

    It is not too late however for the Minister to take up this suggestion. I urge the Minister to announce the setting up of this special parliamentary committee before the signing of the TPPA in Auckland, New Zealand on the 4th of February, 2016.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

  • Remaining concerns regarding the TPPA

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the TPPA Part 2 on the 15th of January, 2016

    Remaining concerns regarding the TPPA

    In my statement yesterday, I praised Minister of Trade and Industry, Mustapha Mohamed and his team at MITI for their efforts in public engagement and in allowing public access to the documents related to the Trans Pacific Partnership Agreement (TPPA). But despite the efforts of the Minister and his team at MITI, there are some key concerns regarding the TPPA which have not be adequately addressed. I will highlight 5 areas of concern here.

    (i)                  Exemptions for Public Private Partnership (PPP) contracts and the BERNAS monopoly on importation of rice

    Malaysia was very successful in negotiating for a number of carve-outs, exemptions and exceptions for itself in the TPPA especially in the areas of government procurement and state-owned enterprises. While some of these carve-outs are useful in providing an adjustment period for the government and Malaysian companies to prepare for the full impact of the TPPA, a few carve outs have a negative effect on Malaysians. Public Private Partnerships (PPP) are not subjected to the government procurement provisions under the TPPA. This means that the practice of awarding lopsided contracts via direct negotiation such as toll concessionaires will continue unabated. The government could have made a stronger argument for Malaysians to support the TPPA if it had subjected PPPs to more open and transparent competition but sadly this was not the case.

    Similarly, the carve out which Malaysia negotiated for Bernas to remain as the sole importer of rice in Malaysia decreases the potential benefits of the TPPA to the Malaysian consumer. The National Impact Assessment (NIA) produced by the Institute of Strategic and International Studies (ISIS) highlights the benefits of additional food security and access to supply of imported rice via Vietnam which is a member of the TPPA. The TPPA will limit the use of export restrictions on rice by countries such as Vietnam, which took place in 2008 when the price of rice experienced a sudden and significant rise. The ISIS report also highlights the potential huge savings of billions of ringgit by the government as a result of having a more stable supply of imported rice. Sadly, such savings will not materialise as a result of BERNAS maintaining its monopoly on the importation of rice. The “large net welfare gains and a significant reduction in Government expenditures” which “are likely if all forms of Government interventions were to be eliminated and a free market allowed” will not take place.[1]

    When I highlighted these two carve-outs to the Minister at the recent TPPA dialogue organised by MITI, he explained that the reason for these carve-outs is because Malaysia wanted to maintain flexibility in these areas. This is a poor excuse for maintaining policies which are beneficial to a select and politically connected few but which hurt the average Malaysian in the pocketbook. A TPPA which forced BERNAS to relinquish its monopoly position would have been easier to support.

    (ii)                The possible impact of unionization, especially of foreign workers in certain sectors such as the plantation sector

    The Labour chapter in TPPA has a positive impact on the ability of workers to form unions, to organize strikes and to affiliate with international bodies. Indeed, Malaysia was one of the four countries singled out (together with Brunei, Vietnam and Mexico) by a group of senior Democratic senators where protection of labour rights needed to be increased as part of the TPPA. The possibility of the increase in the frequency of strikes by workers were highlighted in both the ISIS as well as the PwC reports. The TPPA will force Malaysia to amend its laws so that we can be in line with the International Labour Organization’s (ILO) best practices.

    The ISIS NIA report states that the following laws will have to be amended in order to comply with ILO best practices:

    1. Employment Act 1955;
    2. Trade Union Act 1959;
    3. Child and Young Persons (Employment) Act 1966;
    4. Passport Act 1966 (implementing regulations);
    5. Industrial Relations Act 1967;
    6. Sabah Labour Ordinance (Cap. 67);
    7. Sarawak Labour Ordinance (Cap. 76);
    8. Private Employment Agencies Act 1981; and
    9. Workers‘ Minimum Standards of Housing and Amenities Act 1990.

    NGOs and political parties which are supportive of labour rights should welcome the provisions of the labour chapter in the TPPA. It is likely that labour rights will be one of the key focus areas in the process of ‘certification’ by the United States, especially if a Democrat wins the White House in 2016, since pro-labour groups which are seen to be closer to the Democrats will continue to put pressure on the President and Democratic Senators to ensure compliance on the protection of labour rights.

    Where there are concerns is the process by which new unions are formed and the composition of these unions. For example, the National Union of Plantation Workers currently represent the shrinking number of Malaysians who are working in the plantation sector. What if the foreign workers who currently dominate the plantation sector decides to form a separate plantation workers union where they hold all the power positions of leadership? Will this result in a situation where non-Malaysian plantation workers are able to negotiate a better deal from their employers than their Malaysian counterparts because of their strength in numbers relative to the number of Malaysians who are still in this sector? Will such a demarcation also apply to other sectors and industries which are currently dominated by foreigners? The officers at MITI said that they will speak to each sector and the relevant ministry to chart out the path towards unionisation but I do not feel confident that there is a clear roadmap ahead in terms of ensuring equal labour protections for both Malaysians as well as foreign workers.

    (iii)               The higher possibility of American corporations using the Investor State Dispute Settlement (ISDS) against the Malaysian government

    My concerns regarding the Investment Chapter of the TPPA which allows foreign companies to sue sovereign governments in international arbitration courts is very specific. Many people may be unaware that there are already Invest State Dispute Settlement provisions in a number of Malaysia’s Free Trade Agreements (FTAs) and bilateral investment treaties (BITs). For example, Lynas, an Australian company, can bring ISDS proceedings against the Malaysian government if its license to import unprocessed rare earth from Australia is cancelled, even if it was based on environmental concerns or non-compliance. This is because Malaysia is part of the Australia-New Zealand-Asean Free Trade Agreement and we have also signed an Investment Protection and Promotion Agreement (IPPAs) with Australia.[2]

    It must also be stated that ISDS cases are not as common as one may think. Over the past 30 years, there has only been one ISDS case involving Australia which is the often cited Philip Morris plain packaging tobacco case. Recently, an international arbitration court in Singapore ruled in favour of the Australian government.[3] In addition, tobacco has been explicitly carved out from the ISDS provisions in the TPPA.[4]

    It must also be recognized that the ISDS provisions also accords protection to Malaysian companies who have made significant investments in other countries. A former counsel at an international organisation handling ISDS cases refers to this specific point in an opinion piece published by the Malaysian Insider.[5]

    With all this being said, my main concern surrounding the ISDS provisions in the TPPA is the higher likelihood that the Malaysian government will be dragged for international arbitration by an American company. Under the North American Free Trade Agreement (NAFTA) involving the US, Canada and Mexico, a total of 35 ISDS lawsuits have been filed against the Canadian government, a total of 22 against the Mexican government and a total of 20 against the US government. Canada has lost or settled six claims with a total payout of US$170m in damages while Mexico has lost five cases and paid out U$$204m in damages. In comparison, the US has never lost a NAFTA ISDS case or any ISDS case, for that matter.

    On the other hand, US companies have used ISDS 132 times or 22% of global ISDS claims since 1987 and US companies have won or settled 48 cases, lost 35 and have 37 cases pending.[6]

    The evidence shows a clear trend that US companies are far more effective in using ISDS in their advantage compared with non-US companies. It is this asymmetry which raises the most concern since Malaysia has very little experience in fighting against the might of the law firms which represent the big US multinationals.

    (iv)              The unknown effect on the future prices of medicines that fall under the ‘biologics’ category

    Again, my concern on the possible impact on the price of medicines as a result of the TPPA is very specific. It would be wrong to assume that the price of your Panadol at the local pharmacy, or other currently available generic drugs, would suddenly experience a significant increase as a result of the TPPA. This is simply untrue since the patent protection for the ‘original’ drugs have already expired. Furthermore, it is not as if Malaysia has no current patent protection for pharmaceuticals.

    Table 1 in the ISIS NIA report summarizes the main differences in terms of intellectual property protection for pharmaceutical products (See below). The main difference is that under the TPP, a period of patent protection of between 5 to 8 years will be given to large molecule or biologic drugs, which is not currently available under Malaysian law. The ISIS NIA report indicates a negative impact on Malaysia in terms of the price of medicines but the type and number of medicines which will be affected by the extra protections afforded by the TPPA remains unclear. The ISIS NIA report cites the figures from the Pharmaceutical Association of Malaysia which says that between 5-10% of total pharmaceutical sales comprises of biologic medicines. It is unclear whether or not the percentage of drugs that fall under the biologic medicines category will grow in the future. If it does, then the effect of the TPPA on the price of medicines could increase over time. More clarification is needed on this point especially from the Minister of Health and officials representing the Ministry of Health who have been very quiet on this aspect of the TPPA.

    Source: ISIS NIA Report

    (v)                Copyright extension from 50 years to 70 years under the TPPA

    My final area of concern is in the extension of copyright provisions from the currently existing 50 years to 70 years under the TPPA. The ISIS NIA report indicates that this will have a negative impact on the country. Malaysian consumers will have to fork out an estimated US$115 million a year over the long term as a result of this copyright extension (Think Micky Mouse, Disney and Hollywood related products!). This is a clear indication of the lobbying power of a small number of powerful US based companies who will reap the bulk of the rewards of this copyright extension.

    There has been a lot of misinformation and inaccurate information being circulated regarding the potential negative effects of the TPPA. Here, I have highlighted 5 concerns using evidence and analysis from the ISIS and to a lesser extent, the PWC report, both of which were commissioned by the government of Malaysia. If these concerns are not properly and honestly addressed by the Minister of Trade and Industry, they would constitute sufficient grounds not to support the TPPA.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    [1] The ISIS NIA report quoting the study of Vengedasalam, et.,al, 2011, Malaysian Rice Trade and Government Interventions, University of Sydney.

    [2] http://dfat.gov.au/trade/topics/pages/isds.aspx

    [3] http://www.smh.com.au/federal-politics/political-news/australian-government-wins-plain-packaging-case-against-philip-morris-20151218-glqo8s.html

    [4] http://healthaffairs.org/blog/2015/11/10/trade-health-and-tobacco-exceptionalism-the-tpp-tobacco-carve-out/


    [6] http://www.thirdway.org/memo/trade-q-and-a-whats-the-deal-on-isds

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