Thursday, October 09, 2008


Here is a piece worth keeping and reading!
The bête noire of Malaysia10 10 2008

When everyone is focussing their sights on the impending change in Umno’s leadership, I have just one more article on Datuk Seri Anwar Ibrahim that needs to be posted here. I will try my best to state here that this will be the last one on Anwar before we move on to other issues. I foresee that my next few articles will be about KJ, Tan Sri Muhyiddin, Tengku Razaleigh Hamzah and probably Datuk Seri Ali Rustam, not necessarily in that order.

This posting was derived after reading this article below at;

29 August 2008
by Allyn Young (Allyn Young is a pseudonym used by a Cambridge educated economist who lectures at one of the major public universities in the Kuala Lumpur area)
When Prime Minister Mahathir Mohamad finally announced the inevitable sacking of his Deputy Prime Minister and Minister of Finance Anwar Ibrahim on September 3, 1998 following the introduction of Keynesian-style capital controls a day earlier, a group of anti-imperialists and third world nationalists proclaimed that Mahathir had finally laid to rest the so called neo-liberal malaise that Anwar had purportedly subjected the Malaysian economy to with disastrous results.
Anwar was branded as a puppet of the IMF, who was simply seeking personal glory ‘by choosing to sell the interest of Malaysians to foreigners’. Mahathir – himself considered an authoritarian leader who had destroyed the key institutional instruments of governance in Malaysia to check any credible challenges to his leadership – became an icon among these anti-imperialists the world over.
Using evidence from my advisory role, this commentary is targeted to correct this presumptuous claim. Instead of focusing on the scientific and historical evidence associated with epistemology, the anti-imperialists and pseudo critics of the Washington Consensus( IMF, the World Bank and the US Treasury) found a straw man in Anwar and a savior in Mahathir to build this ‘great story’ of how Mahathir saved Malaysia from certain collapse by ‘discontinuing Anwar’s deleterious neoliberal financial policies’.
While I have much to say about the circumstances that faced Malaysia in 1997 which offered the country the option of seeking capital controls when Korea, Thailand, Indonesia and Philippines had to go cap in hand to the IMF, I focus on Anwar’s actions as Malaysia’s Finance Minister.
Anwar had time again insisted in some of his meetings that the free flow of capital and the Malaysian ringgit was causing havoc to exchange rates and the stock market. He even lamented once over the massive offshore ringgit kept in Singapore that affected Bank Negara’s capacity to manage monetary policy. He cited that instruments were necessary to provide sufficient control of the ringgit against volatile fluctuations caused by currency traders. What he did not share with Mahathir was his stand on corruption and cronyism.
I remember Anwar saying that all Government linked Companies(GLCs) destabilized by losses should be supported with fresh loans but only after proper audit scrutiny. Now no scholar or sensible politician – whatever their ideological learnings - would support bailouts that arise from losses in consumer benefits through a misallocation of funds to the corrupt and incapable. Anwar was in support of Keynesian style packages but wanted them introduced alongside instruments that would weed out corruption.
Anwar was also serious about fiscal policies to take account of distributive justice in the months between December, 1997 and April, 1998. In fact, he had dismissed a report prepared by a team of IMF-style consultants on measures to rescue the East Asian economies affected by the 1997-98 Financial crisis. He had written on the cover of that report that it must be rewritten to address problems of social justice.
I was approached by his advisors to rewrite the report and took it on eventually after his team headed by Khalid Jaafar agreed to allow me to change it completely. It was unfortunate that Anwar did not manage to present it as he was replaced by Daim Zainuddin and sacked by Mahathir.Yet, there is enough historical evidence to back Anwar’s claim that he is a believer in social justice. After all, mentored by the widely respected social activist and former University of Malaya academic Professor Dr Syed Husin Ali during his undergraduate days, Anwar was arrested and jailed for his role in championing the rights of the poor during the Baling riots and the protests he commandeered as a student union leader at University of Malaya in 1974.
It must be said that the young and brash leader of the 1970s was then a champion of the poor at a time when government policy was very much in line with the dictates of the IMF and the World Bank. However, he had become a mature leader in the 1990s following his apprenticeship as the Finance Minister of Malaysia from 1995 to recognize the need to connect distributive justice with sound economic principles. In addition, in the spirit of intellectual discourse, Anwar had also developed the capacity to exchange views with experts from different schools of economic philosophy in a cordial and constructive manner. As a result, he enjoyed strong friendship with several heads of governments and global organizations.
Anwar remains a strong advocate of the humane economy as articulated in his Malaysian Economic Agenda and reflected in the 2008 Election Manifesto for Pakatan Rakyat, which he again stressed during his ceramahs and meet- the people- sessions during the campaign for the Permatang Pauh by-election. The fact that he won decisively over his UMNO opponent showed that his economic agenda founded on sound economic growth and distributive justice was fully endorsed by voters.
I read the article above with much interest.
With all due respect to the Cambridge educated economist, her/his analysis is vague and bordering generalization.
Firstly, I would like to clarify here that Anwar was not arrested and jailed for his role in championing the rights of the poor during the Baling riots but rather, he was arrested and jailed because he was desecrating the Malaysian and Umno’s flag during the riots.
Very much like how Lim Kit Siang in 1969, was desecrating the flag in front of Datuk Harun Idris’ house in Kampung Baru just prior to the May 13 incident. He then spent about 18 months in the ISA.
Anyway, is Anwar a believer in social justice? Is he a strong advocate of humane economy? Those were the questions the author above wanted Anwar to be favourably remembered as.
The IMF encouraged Anwar to lift the prices of controlled food items and increase the banking interest rates. Is that humane to us Malaysians?
Read here in the news at that time.
I’m surprised the writer chose not to remember this. This, and among other destructive measures were the ones that made us Malaysians suffered in our lifestyle.
If not for the strong intervention by the government, we could end up with economic strife like Thailand and Indonesia at that time.
The fact that the writer said Anwar made a stand against cronyism and corruption ring hollow to my ears when in June 1998 at that time, Anwar and his family members as well as his cronies were on top of the list of those who received government contracts.
And during his tenure as the Finance Minister, he was the sole signatory for the approval of contracts under the ‘Program Kontraktor Wibawa’. We had to be really naive to believe that certain percentage of the said projects did not go to his cronies or perhaps *gasp* himself.
Is there no reasonable doubt in this instance?
Instead of pursuing capital controls, Anwar had foolishly urged BNM to cushion the impact of the fallen ringgit with currency speculation.
As the result, BNM lost billions of ringgit in early 1998. This move was even criticised by Lim Kit Siang in Parliament.
He was also the strong supporter of ‘creative destruction’ of the economy.
Which would have a devastating effect if he allowed the huge GLCs, with thousands upon thousand of workers to go bust just because he would want the foreign hands to have an easier dip into our national wealth.
Should we at that time let globalization (in reality, economic colonization) engulf us like how Indonesia and Thailand suffered? Most of their strategic business entities are controlled by the Americans.
Therein lies the conundrum of surrendering your sovereignty, or remaining steadfast in the face of challenging global environment.
We had to survive at that time. But we wanted to survive within our own terms. Why should we let others dictate us?
The assumption that other countries that were helped by IMF becoming stronger than us is also erroneous.
In his speech in Singapore in 2007, Anwar tried to debunk his apparent mistake by justifying that the said countries (South Korea and Singapore) fared well in relations to having small budget surplus in 2003 and 2004 whereas Malaysia is still having deficit in budget.
But he failed to mention that Singapore was not aided by IMF while South Korea had to have budget surpluses due to the condition set by the IMF itself. What had South Korea sacrificed? Its foreign exchange reserves is lower when compared to Malaysia (only USD 9 billion in 1998 - 2000). Plus, in order to achieve budget surpluses, South Korea had to sacrifice a lot of allocation meant for national development.
As the result, the USD58 Billion package deal was finally paid off in 2001.
Anwar also failed to mention that South Korea is already on the brink of being a developed nation in late 90’s if not already.
That is why, they could bounce back quickly as compared to Thailand and Indonesia.
If Malaysia had taken the same route like South Korea, we may not end up like South Korea, but instead like Indonesia. Furthermore, like I said earlier, our economic independence would have been greatly compromised.
Remember the austerity package Anwar introduced in 97/98? That shows how shallow his comprehension in economy. When a nation is suffering from an economic crisis like the currency crisis we experienced in 1997/98, an austerity package will further cripple the economy.
Instead of spending, he wanted the government to save. In an economy where source of wealth is accumulated by trade, further generation of economic activity is a must in order to overcome an impending credit crunch.
When the private sector had curtailed their spending in lieu to the fear of the unknown, then it is up to the government to spend in order for the economy not to stall. If the government also tries to save, then nobody will earn money. Thus, economy will become stagnant and fall.
But what he did was exactly that - increase the interest rates on loans so that it would be difficult to do business, shorten the NPL tenure to 3 months resulting in bad credit for businesses, cutting development projects for the people that could actually drive the economy forward.
He probably was naive in believing that the IMF prescription could work. In the current era where the US is also subscribing to similar measures much like our own, it is indeed ironic that we need to compel ourselves to view Anwar and the IMF as our fallen saviour in 1998.
It’s only natural that the writer tries to expunge Anwar from being portrayed as the IMF boy. With the premiership probably within his grasp, it is good to have a hatchet man that could expound any ‘misperception’ about the PM in waiting.
But the truth is, Anwar cannot escape all the misjudgments he made and all the erroneous decisions which had further derailed the economic strength of the society at that time - the very society he is trying to ’save’.
Hopefully, this society will not see him as the fallen saviour in 1998, but rather as the bringer of ’social injustice’ and advocate of ‘inhumane economy’.
I offer another side of view for the crisis in 1998 and how Anwar had a hand in it.
For more reading material, please read here.
I may be wrong in this analysis. If I am, please enlighten me. After all, I was not trained in Cambridge or Oxford.


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