Time for real change for Malaysian education as glory stuck in the past and the delusion of Vision 2020

New decade, new Malaysian education: For the sake of our children and our future, Mazlee’s replacement should be a qualified and capable Malaysian – irrespective of race or religion.

Dr Maszlee forced to resign for failing to heed Cabinet orders

We need a new Education Minister with the right qualifications, a scientific mindset and a technocratic iron will to implement the critical changes.

I HAVE been a big critic of and objector to Maszlee Malik as Education Minister from day one.

I took no pleasure in it then nor do I take pleasure in it now. It just is. The wrong person must go and the right person must come in.

Education is far too important for a nation to be entrusted to those not competent in moulding the minds of our most precious resource, our youth. Education is where we develop this resource for either the success or the failure of our nation.

We do not have to look far to see success. A country with no natural resources, with a tenth of our population, can be a developed nation by sheer power of its human resources.

In 1965, Malaysia and Singapore went separate ways in more ways than one. Look at where they are and look where we are now. The lessons to be learned are abundant. Have the humility to know when we are wrong and they have been right all along. There is no need to look East. Look South.

“A nation is great not by its size alone. It is the will, the cohesion, the stamina, the discipline of its people and the quality of its leaders which ensure it an honourable place in history, ” said its architect, Lee Kuan Yew in 1963.

The education ministership is the leader in ensuring that our children and our youths are able to take the nation to the next level. It is just not at the very top have we got it wrong, again and again. We must have the humility to admit when we are wrong and have been wrong for more than 30 years. We must have the decency, discipline and courage to want to change so our future can be assured.

What did Singapore do right in education? When one looks at massive differences in results, one need not look at many things. One need only look at the fundamental deviation at the root.

One: Singaporean education is in English.

Despite more than 76% of its population being ethnic Chinese, the medium of instruction for its public schools is English. Have you ever heard the Singaporean government or its leaders talk about “memartabatkan” (to give dignity to) the Mandarin language? They have no time for such foolish ethnic pride.

They may find ways to conserve Chinese heritage but they have no interest or inclination to play to racial sentiments that would sacrifice the very essence that will ensure their children have the easiest access to the widest and latest conservatory of human knowledge since the late 19th century.

As such, accessibility of critical knowledge for their children and subsequent generations are assured from young and is continuous throughout their lives. It is so easy to do for those who have the best interest at heart and yet so difficult to do for those with foolish pride and Machiavellian political ambitions.

No mandatory Chinese calligraphy is needed to ensure Chinese heritage continues. No shouting of slogans of Ketuanan Cina and its preservation. That is confidence in your own ability to shape destiny. To hell with all that. Learn in English.

Two: Their education is secular. Because that is the essence of education

One of the greatest physicists and teachers of the 20th century, the late Nobel Prize winner Richard Feynman, famously said, “I would rather have questions that can’t be answered than answers that can’t be questioned.”

That, ladies and gentlemen, is what makes an education.

Singapore does not impose belief on its citizens. And that starts in education. Question everything and everyone. Anything that cannot be questioned has no place in the classroom of public education. That is called indoctrination.

You want to indoctrinate your children that the sky is filled with butterflies and angels in the morning, go ahead, but not on our time or our dime.

It is abhorrent the amount of taxpayers money and children’s time that have been wasted on indoctrination of belief. Indoctrination stops you from thinking, it is the complete acceptance of belief.

As Einstein said, “Education is not the learning of facts, but the training of the mind to think”. Religion is not about thinking, its about accepting.

Religion – any religious indoctrination – has no place in public education. You do not find that in Singapore and you do not find that in any other developed nation. If you want to include religion in public education, do it as part of comparative religion in the social sciences context. Otherwise it is indoctrination. It is useless as education.

Belief, religion and its indoctrination must be the domain of parents, if they so choose, and not government. Otherwise the result is imposition, persecution and finally tyranny of belief upon the citizenry. And no nation will survive such tyranny.

There is a reason great men of history have warned us against such wanton imposition of religious beliefs and indoctrination of the masses. Thomas Jefferson once said, “In every country and every age, the priest had been hostile to liberty.”

We need to heed this warning.

Three: One word – Science.

I have said this again and again. Science is the salvation of a nation, especially today in the 21st century.

The triumph of human civilisation is the triumph of science. The ascendancy of humankind, each empire, each nation and people has been through their grasp of the “science” of their time and its application in their minds and lives.

Our education must be science-centric. No ifs or buts. There must be more basic science taught, learned, experimented with and exposed to our children from the day they start school until they leave it. In depth and breadth and in the number of hours spent on it. We must have truly competent and passionate teachers to carry out this duty.

Even as a lawyer, I have learned that the human mind and senses are limited. Nothing fools humans more than their minds and their own senses.

In just the last decade, more convictions of innocents due to so-called eye-witness testimonies, even multiple ones, have been overturned as a result of DNA evidence to the contrary. Why? Science has proven that human senses and minds can be easily fooled, especially by emotion and herd mentality. But science is objective, evidentiary knowledge.

We need to build a science-centric society and that starts with our primary and secondary education. From the beginning, Lee realised the importance of establishing Singapore as a leader in the field of science and technology in Asia. He did not care what your ethnicity or religion was, that was the priority. And look at the society he built. Modern in outlook and progressive in thought, to the point he could no longer really control the people.

Maybe that is what our leaders are afraid of. A questioning, educated, critical thinking masses.

We must halt this downward slide of epic proportions in Malaysian education.

A new education minister with the right qualifications, a scientific or science-centric mindset and a technocratic iron will to implement critical changes must be appointed. Nothing less can be acceptable to Malaysians. This must be our demand.

I believe the next appointment will be a critical test whether this Pakatan government is worthy of our consideration in the next elections or an alternative must be considered and pursued vigorously by the right-minded citizenry.

We need the new education minister to implement what is needed. Go back to the basics and have the will, courage and ingenuity to make tough changes against what I expect to be conservative political opposition, both racial and religious.

If the person is more interested in putting colleagues in religious brotherhoods ahead of qualified intellectual professionals in positions of authority in education, then we are all doomed.

If the person is more interested in telling and allowing teachers to carry on dakwah (Islamic preaching) instead of closing down separate canteens in schools, then our quagmire will continue.

Black shoes and hotel swimming pools. That is the legacy we have been left with.

We need to see the closing down of worthless tax-payer funded universities that carry the word science but are based on beliefs and scriptures. They make a mockery of our nation and society. They promote the dumbing down of our population and produce graduates that will have nothing to contribute but further destruction of the Malaysian civilisation. We need a shake down of epic proportions for Malaysian education to return it to its past glory and make future progress.

As such, unlike a certain racist and bigoted MP from PAS, who insists on a Malay Muslim candidate only for the post, we need a minister who is qualified, irrespective of race or religion. We just need a Malaysian who is capable, for the sake of our children and our future.

We need an education minister who understands what is essential education. It is not rocket science.

But like all things in Malaysian politics, I have stopped believing in the capabilities or integrity of most of our politicians and political leadership. How I hope that I am proven wrong.

I close with this quote from Carl Sagan, one of the foremost teachers of science: “We live in a society exquisitely dependent on science and technology, in which hardly anyone knows anything about science and technology.”

That could very well describe our Malaysian education system and administration.

But 2020 has arrived, so it’s time for real change to happen.

Activist lawyer Siti Kasim is the founder of the Malaysian Action for Justice and Unity Foundation (Maju). The views expressed here are solely her own.

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Comment: Tough times for Chinese education

A glimpse of glory 

 We once had a vision of a future, but now that it’s here, we still seem stuck in the past.

Cutting edge: Schools in China have begun to emphasise the teaching of coding, robotics and AI in the great push to produce the best engineers and digital experts. — AFP

WE are already into 2020 and it’s the dawn of a new decade. But if we buy into the endless narrative of race and religion, it’s as if we haven’t moved.

Six decades after Malaysia’s independence, and we are still trapped in this blinding obsession with ethnicity, which has done nothing but consume so much of our time and energy.

When rationale flies out the window, and reasoning fails, some politicians and self-declared communal champions resort to bigotry ways.

And of course, the most unscrupulous sometimes tell our citizens they should leave the country if they are unhappy, although incredulously, some of these characters conveniently overlook how their forefathers came to Malaya nearly the same time as the rest.

If Malaysia is caught in the middle income trap now, with our inability to reach a higher level of income, that’s down to not having changed in how we’ve functioned economically for the past 40-odd years.

The middle-income trap concept refers to the transition of low income to a middle income economy.

We have failed to achieve the Vision 2020 objective of becoming a developed nation, and the architect of that plan, Tun Dr Mahathir Mohamad, has blamed his successors for the failure.

Now, the Pakatan Harapan government – also led by Dr Mahathir – has unveiled the Shared Prosperity Plan for 2035. It remains to be seen if we will reach that goal, either.

But at the rate we are moving, it’s hard to ignore how the voice of hope has somehow hushed.

In fact, Vision 2020 set off bigger expectations and optimism, but now there seems to be a lack of purpose and leadership.

If Malaysia is facing a middle income trap, then we are also snagged in a political status snare because we are heading nowhere as a nation, as we recklessly hand racial and religious hardliners the wheel of the nation.

Unelected religious activists seem to be speaking more boldly than many elected representatives, who seem content to let these fringe personalities hog the headlines.

In the digital age, the decibel level has been cranked in social media, and comments posted by their fans to support these hawks have become more seditious and disturbing.

It’s hard to break free from that gnawing sense that they are allowed to continue because the government fears putting a leash on them.

Our Pakatan Harapan leaders, especially those from Bersatu, seem to lack the will to take on a centrist role, and worse, have attempted to compete with those playing the race and religion cards.

While these political shenanigans may gain domestic mileage, it doesn’t help Malaysia one bit because many see it as part of the inability to get our act together.

They see the vibrance and innovations of Thailand, Vietnam and Indonesia, and want a slice of that pie. But anyone who has been to the cities of these three Asean countries will understand why they are selling their stories much better to investors.

Let’s be blunt – they are telling investors to forget Malaysia as they highlight our continuing basket case political mentality and actions, with its cyclical scripts in tow.

Who can take us seriously if we believe a group of retired communists in wheelchairs can threaten national security over a reunion, which looked more like their farewell dinner?

Even the communists in China and Vietnam – countries which have good diplomatic ties with Malaysia – have embraced capitalism unlike those in other established free markets. The only thing communist is their political structure, that’s all.

And we still hear some small-minded chauvinists calling for the closure of vernacular schools, claiming they are the root to disunity.

The cause of our fragmentation isn’t these schools (which have produced many great talents), but the resident bigots and extremists.

Framed against this backdrop, it has become even more pertinent for those in significant positions of influence to speak up against these tyrants.

In November, Singapore launched its National AI Strategy, with three objectives to ensure it becomes a global hub for developing, test-bedding, deploying and scaling AI solutions, as well as learning how to govern and manage the impact of AI.

Schools in China have begun to emphasise the teaching of coding, robotics and AI in the great push to produce the best engineers and digital experts.

But our school system continues to be weighed down by politics, religion and language.

For just awhile, can we ask ourselves why we have been so preoccupied and emotional over so many superfluous issues that do nothing to propel Malaysia to become a developed nation?

It’s a small world after all, and in 2020, the world has become increasingly inclusive and is culturally more open and dynamic. But if we continue the way we are, we will remain in the lower tiers of national progress.

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Can the world order catch up with the world? 

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Vision without execution is delusion

Few countries peer far into the future, but in 1991, Malaysia’s Prime Minister Tun Dr Mahathir Mohamad(filepic) declared Vision or Wawasan 2020. ... Looking back, was it possible to achieve this breathtaking vision? In my humble opinion, definitely. How much of it has Malaysia achieved? The answer depends on who you talk to.

 

The ideal eyesight is 20-20 vision when we can see everything clearly and know exactly where to go.

Given that 2018 and 2019 have been years of great populist upheaval, geopolitical tensions, massive climate change and technology transformations, it is not surprising that our first year of the third decade of the 21st century is masked by the fog of uncertainty.

Few countries peer far into the future, but in 1991, Malaysia’s Prime Minister Tun Dr Mahathir Mohamad declared Vision or Wawasan 2020, “the ultimate objective that we should aim for is a Malaysia that is, by the year 2020, a fully developed country in our own mould, according to the standards that we ourselves set”.

To set a five-year plan is common place; to lay out a vision 30 years to the future was breathtaking in audacity. Dr Mahathir himself laid out nine challenges to achieve by 2020: first, establishing a united Malaysian nation made up of one bangsa (race); second, creating a psychologically liberated, secure and developed Malaysian society; third, fostering and developing a mature democratic society; fourth, establishing a fully moral and ethical society; fifth, establishing a matured liberal and tolerant society; sixth, establishing a scientific and progressive society; seventh, establishing a fully caring society; eighth, ensuring an economically just society, in which there is a fair and equitable distribution of the wealth of the nation; and ninth, establishing a prosperous society with an economy that is fully competitive, dynamic, robust and resilient.

Looking back, was it possible to achieve this breathtaking vision? In my humble opinion, definitely. How much of it has Malaysia achieved? The answer depends on who you talk to. On the issue of advanced country status, Malaysia is one class below in the upper middle income bracket with a gross national income (GNI) range of US$3,996 to US$12,375 per year. High-income economies are defined by the World Bank as those with a GNI per capita of US$12,376 or more. The IMF estimates Malaysia’s 2019 GNI per capita at US$11,140, pretty near the top end of the upper middle-income range, so it is certainly within striking distance. Indeed, if the exchange rate goes back to roughly RM3.80 to US$1, Malaysia would attain high income status. On the issue of national competitiveness, Malaysia ranks 27th out of 141 nations surveyed by the WEF Global Competitiveness Index (2019). This is no mean achievement, as her financial markets are ranked 15th.

But with Malaysia’s Gini Coefficient about the same as the United States (41st), social equality is nothing to be proud of, but at least advanced countries have not also achieved fairness in income and wealth that they vaunt.

Malaysia is a country blessed with large natural resources relative to the population, located in the high growth zone of East Asia and an important contributor to the global supply chain. She faces the same difficulties and challenges of most emerging markets in how to position oneself in a global situation that is fraught with new and somewhat daunting problems of geopolitical tension, climate change and massive technology transformation.

As the example of high income, sophisticated Hong Kong economy has shown, no one can take economic freedoms and competitiveness for granted, because politics can change the game almost overnight. What most governments struggle with is how to prepare the population, both the working class and the young, to adapt to the emerging technologies through education and re-skilling.

So it is not surprising in this age of digital divide that the most contentious area of politics is often in education.

Actually, there is not so much a digital divide as a knowledge divide – we are divided by our ignorances of each other and our inability to appreciate that what is about to kill or marginalise us is global climate change, conflicts and disruptive technology.

But what separates us from working together is ideology, religion and ultimately identity, turbo-charged by fake news that says the other side is always the bad guy.

In other words, polarisation can be reduced from working together to deal with external threats, but internally recognizing that there are common, shared interests and objectives.

Personally, climate change is the existential threat, whilst there is little that small countries can do about Great Power politics.

But technology is what each country can adopt to deal with climate change and keeping up with competition. Small countries like Singapore, Sweden and Switzerland carry much more clout than their size because of their willingness to invest in technology. The real threat of artificial intelligence and Big Data is that only the few that have scale and willingness to invest in knowledge will be the big winners.

This explains why the US and China have the leading tech platforms, because they not only have scale, speed and scope, but also the focus to work on the AI breakthroughs.

But recognising the threats and opportunities is only half of the Vision thing.

Vision without execution is delusion.

Getting the execution right is then all about politics and the bureaucracy.

Boris Johnson’s election victory on Brexit showed that he had the correct vision that the British were tired of European bureaucracy that stifled their freedom of action.

But whether he can change the British business model means that he has to radically transform a British civil service that has followed EU laws and mindset. This is exactly what Carrie Lam has to do with the Hong Kong civil service that is operating behind the times.

MIT economist Cesar Hidalgo quotes the essence of the modern problem by citing top football coach Josef Guardiola as saying that “the main challenge of coaching a team is not figuring out a game plan but getting that game plan into the heads of the players.”

Any plan or vision must be internalised by the players, because only they can execute the plan in the game that is ever changing and uncertain. In short, no vision in 2020 can work until the political leadership understands that only by internalizing the diversity of the team can the team be a winner or at least not a loser.

Happy 2020.

The views expressed are the writer’s own.

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Chinese economy expands 6.9% in 2015, slowest growth in 25 years

Video: http://t.cn/R4QD2R0China’s economy posted a 6.9 percent GDP growth in 2015, which is within people’s expectations. Faced with suspicions, the National Bureau of Statistics (NBS) emphasized that the figure – 6.9 percent – is real.

On the one hand, with an increasing number of “struggling” companies, the economic downturn has become a heated subject of public opinion. On the other hand, other fields, for instance, tourism, railways and online shopping, are seeing robust growth. So, taken together with the affirmation by the NBS, we can have confidence in the accuracy of the figure.

It is safe to say that people still have much confidence in the economy. Despite an economic downturn, people’s willingness to spend is witnessing an upward trend. Consumption is contributing more to GDP growth. Compared with some pessimistic comments, an increase in consumption can better reflect public confidence. In addition, citizens’ plans for their families and their futures are positive as a whole. Admittedly, the loss of confidence in the stock market has exerted negative effects. Society has varying degrees of confidence in the economy.

The 6.9-percent increase in GDP will not strike a blow to the confidence of Chinese society. Even if the figure were slightly lower, there is still a lot to sustain people’s confidence. In fact, different from Western society, politics carries some weight in how confident Chinese people feel.

There are a number of factors contributing to the public’s confidence in the economy. First of all, people believe in the government. As long as the government’s determination and confidence to develop the economy can be seen, the public will be reassured. The government has made many commitments regarding economic development and people's living standards. It is becoming increasingly honest about the difficulties as well. The government’s backbone is not weakening. Yet, there is increasing dissatisfaction with the laziness of some officials. This new phenomenon is worth paying attention to.

The Chinese people are confident about the country’s market potentials. They know that the country lags behind in many aspects and that great efforts are needed. People tend to believe that it will be an arduous task to narrow the gap of people’s livelihood between China and developed countries. Despite the long road ahead, few people believe the process will break down.

Since the Communist Party of China launched the anti-graft drive and pushed forward reforms, many people expected the country to make greater achievements. But China is in a full-fledged transitional period. Its 1.4 billion population is to China’s advantage.

Complaints can be heard in China, and many concerns are well grounded. Some people try to seek a sense of security by applying for a foreign green card and transferring their assets overseas. But China’s status as the world’s biggest emerging market and potential for opportunities is as significant as ever.

China has plenty of tasks. Many cities still lag behind in basic infrastructure. Many roads need to be rebuilt. The key for change is economic growth. In addition, medical care cannot meet public demand. Many parents have sent their children abroad due to the low quality of education. The Chinese people’s concept of consumption is changing fundamentally and people long for improved living standards. These will all serve as a robust foundation for sustainable economic growth.

There should not be any fear that the 6.9 percent growth will upset Chinese society. The Chinese people will remain confident. The government needs to achieve concrete results and need not rush to adjust its policies. Many problems will be solved as long as China is on the right path. - Global Times

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European anti-crisis strategy: Sex, drugs, alcohol could boost economic growth

The euro sculpture is seen outside the headquarters of the European Central Bank (ECB) in Frankfurt, Germany. European governments are slowly turning to drugs, sex and contraband as a way to boost their respective economies. — Reuters pic

European governments are turning their attention to prostitution, drugs and contraband as possible ways of boosting their economic growth profiles, as they struggle away from their debt crises, AFP reports. 

Sex and drugs to add to Europe's murky GDP figures

Italy caused a stir when it announced last month that it would begin including revenues from drug trafficking and the sex trade, as well as contraband tobacco and alcohol, to calculate gross domestic product (GDP) from next year.

One effect would be to reduce the public deficit as a ratio of output, if EU authorities were to accept the idea. That would be a big help to countries trying to get their public deficits below the EU ceiling of 3.0 percent of output.

In 2012, Italy's central bank estimated the value of the criminal economy at 10.9 percent of GDP. Including these figures could therefore boost the country's growth to above the government's 1.3 percent estimate.

Last month, Britain said including illegal activities such as prostitution and drugs into national accounts would add about 10 billion pounds (12.3 billion euros, $16.8 billion) to GDP, equivalent to about one percent of national output.

Using the undeclared or so-called black economy to calculate national statistics is part of a range of changes recommended by the European Union's statistical institute, Eurostat, to be implemented in September.

Eurostat said including such data would allow a better comparison between countries with different laws.

"GDP is not an indicator of morality," said a spokesman, adding that only transactions carried out consensually would be included.

But others are less convinced.

Eric Vernier, researcher at the Institute of International Relations, said including "gross criminal product" in growth figures is a cynical attempt to combat the Eurozone's debt crisis.

"The problem is to put this new statistical method on the table at the moment when everyone has budget problems," he said.

"There has been a general acceptance of this accounting approach since the crisis: what matters most is what goes into the state coffers."

"Denial of basic morality"

Many of Europe's struggling governments will welcome any boost to growth figures that will reassure both disillusioned voters and markets.

But the decision has sparked outrage among politicians and rights groups.

The French minister for women's rights Najat Vallaud-Belkacem and Belgium's Interior Minister Joelle Milquet, have both written to the European Commission to express their "astonishment" over the proposals.

"Prostitution is not a voluntary commercial activity. To believe that it can have an ideological bias is a mirage and an insult to the millions of victims of sexual exploitation worldwide", they said.

"Prostitution cannot be assumed to be a transaction freely agreed between parties. The question also arises concerning drugs, especially hard drugs, considering the issue of addiction," added Ronan Mahieu, head of INSEE, which calculates France's GDP.

A spokeswoman for the Association for the Protection of Women's Rights in Britain said the group was "surprised and saddened" by the decision.

While in France, Marine Le Pen, the leader of the extreme-right National Front party which came top in recent European Parliament elections, described it as a "denial of basic morality."

'Shadow market'

Europe's black market is already huge, according to experts.

Friedrich Schneider, professor at the Johannes Kepler University of Linz in Austria, estimates that the European Union's "shadow market" is equal to 18.6 percent of the bloc's 2014 GDP.

But calculating the value of illegal activities is no easy task.

An EU document from 2012, littered with acronyms and complex mathematical formulas, gives guidelines on how to calculate the "inputs" of the prostitution industry, such as the cost of renting an apartment, or "transport and storage" for drug traffickers.

It even includes how to interpret the "ratio of purity" in narcotics.

Schneider argues that undeclared illegal activities and "value creating" services such as prostitution should be included in the calculations, but not totally criminal activities.

On this basis, Germany, Italy and France account for about half of Europe's black-market activities.

In recession-hit Greece, he estimates that black market transactions account for an estimated 23 percent of GDP, lower than the estimated 40 percent of the less-developed economies of Eastern Europe, but far higher than the roughly eight percent in Luxembourg. - AFP

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Malaysia GDP grew by 5% in Q3 2013, Economy and Growth Outlook projections

KUALA LUMPUR: Malaysia’s gross domestic product (GDP) grew by 5% in the third quarter, faster than the 4.7% expansion most economists had predicted, as the economy benefited from strong domestic demand and a rebound in exports.

Bank Negara yesterday also revised the country’s second-quarter growth to 4.4% from 4.3% previously. The central bank is maintaining its full-year growth forecast at 4.5% to 5%.

The GDP is one of the primary indicators used to gauge the health of a country’s economy. It represents the total dollar value of all goods and services produced over a specific timeframe.

“Domestic demand remained the key driver of growth, expanding by 8.3%, while exports turned around to grow by 1.7%,” Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said at a press conference.

She noted that emerging signs of a recovery in the major advanced economies are expected to support overall growth.

“For the Malaysian economy, the gradual recovery in the external sector would support growth. Domestic demand from the private sector would remain supportive of economic activity amid the continued consolidation of the public sector,” she said. “Going forward, economic growth is expected to be sustained although risks continue to remain.”

She said the global economic recovery was under way, but with downside risks from uncertainties over the fiscal and monetary adjustments in several of the major advanced economies.

“The other main contributor to GDP is investment, which is even more important as investment activity leads to capacity expansion, and allows our economy to experience future growth,” she said.

Malaysia’s current account surplus for the third quarter jumped to RM9.8bil, equivalent to 4.1% of the gross national income (GNI), from RM1.5bil in the second quarter.

This was mainly due to a higher surplus in the goods account. The GNI comprises the GDP together with income received from other countries less similar payments made to other countries.

She said net exports turned around and posted a positive growth of 1.6% after seven consecutive quarters of declines, driven by external demand, high commodity prices and strong investment activities.

The ringgit also experienced volatility in the third quarter, as expectations for a scale back in the US Federal Reserve’s asset purchase programme prompted a reversal of capital flows from most regional financial markets.

“The volatility was to a lesser extent than what we had seen previously at the height of the global financial crisis. The movement is similar to other currencies,” Zeti said.

She said the foreign exchange market was significantly larger and liberalised now and market players were, therefore, doing the intervention. However, she said Bank Negara would intervene if there were any severe volatility or market disorder.

“The region is in a better position to cope with more volatile conditions, as the financial markets are now larger, better developed and more mature.

“We believe there will not be an exodus out of this region, as our region remains an important growth centre in the global economy and, therefore, we will still be the destination for investment activities,” Zeti said.

The consumer price index was also higher at 2.2% due to higher inflation in the transport and food and non-alcoholic beverages categories.

Speaking on the subsidy rationalisation plans the Government has embarked on, she said the opportunity still existed for these price adjustments to be made gradually.

“We are on a steady growth path, and we have not experienced strong demand that would result in strong inflationary pressures. Therefore, it is a good time to make such adjustments,” Zeti said.

-Bernama/The Star/Asia News Network

Malaysia Economy Outlook 2013

KUALA LUMPUR (Nov 18, 2013): The Malaysian economy is expected to see between 4.6% and 4.7% growth in gross domestic product (GDP) for 2013, according to economists, in line with Bank Negara Malaysia's (BNM) projection of a 4.5% to 5% growth this year.

Alliance Research revised its full-year GDP forecast marginally upwards to 4.6% from 4.5% previously, after BNM released the third quarter (Q3) GDP data on friday which saw a stronger growth of 5% for the quarter on the back of a strong recovery in the external sector, as well as expansion in domestic demand. The research house anticipates a 4.8% growth in Q4.

"While growth may be affected by the recent announcements on the sequencing of certain Economic Transformation Projects and policy reforms such as the subsidy rationalisation programmes, we remain positive that the improving external environment would likely offset the weakness and support growth in the coming quarters," said Alliance Research economists Manokaran Mottain and Khairul Anwar Nor Md in a note.

For 2014, it expects growth to pick up to 5%, underpinned by robust domestic demand and improving external conditions.

RHB Research Institute estimated real GDP to grow at 4.7% in 2013, at a slower pace than the 5.6% growth recorded in 2012.

"Growth, however, will likely bounce back and register a faster pace of 5.4% in 2014, as domestic demand will remain a key driver of growth along side with a further improvement in exports," said its economist Peck Boon Soon.

The central bank said going forward, the gradual recovery in the external sector will support growth. Domestic demand from the private sector will remain supportive of economic activity amid the continued consolidation of the public sector. The economy is therefore expected to remain on its steady growth trajectory.

Meanwhile, BNM Governor Tan Sri Dr Zeti Akhtar Aziz stressed that the current volatility in the financial market is comparatively lesser than that experienced during the global financial crisis.

"We're in a position to cope. We've significant reserves of US$137 billion (RM446.2 billion) and we've many swap arrangements with other banks around the region. The region can come together to respond collectively if there's any crisis.

"Previously (under harsher conditions), we'll probably have a 1% to 2% growth. Now we've rebalanced our economy where domestic demand is an important driver, so it'll allow a 4% to 5% growth," said Zeti.

She said Malaysia's financial markets are larger, better developed and more mature now, adding that financial intermediaries are stronger and more importantly, there is greater diversification of portfolios.

"We believe there's not going to be an exodus out of our region (Asia) and it remains an important growth centre in the global economy. Therefore we'll still be a destination for investment activities," said Zeti.

On the ringgit, she said its volatility is similar to the movements of other currencies.

"We've liberalised the market to allow for unlimited hedging for an unlimited time period to hold a foreign currency account. Our corporate sector is in a better position to better manage their foreign exchange exposure, given that we've seen significant two-way flows. "In the event when the market has a risk of becoming disorderly, the central bank will step in to smooth out that volatility."

However, she said in the medium term, the ringgit should reflect the economy's underlying fundamentals.

"If all remains positive, (ringgit) should see an appreciating trend… but as fundamentals change drastically over a short period of time, then the appreciating should remain in a gradual trend."

Contributed by  Ee Ann Nee The Sundaily

Malaysia's 2013 forecast growth revised by IMF

THE International Monetary Fund (IMF) has revised its growth forecast for Malaysia to five per cent for 2013 from its previous projection of 4.7 per cent.

Growth will be underpinned by the domestic demand, with low unemployment and subdued inflation.

In its latest medium-term outlook, which was released following its Article IV Consultation recently, IMF projected growth until 2017 to be between 5.1 per cent and 5.2 per cent.

"Although the domestic demand growth pace is lower than that recorded in 2012, it is still sizeable at over six per cent from 11.6 per cent last year," IMF resident representative Dr Ravi Balakrishnan told the Business Times from Singapore yesterday.

Higher spending by households, firms and the government on consumer and capital goods has offset weak exports to Europe and the rest of the world.

Consumption has been supported by low interest rates, a strong labour market and fiscal transfers to households.

Balakrishnan said Malaysia has done remarkably well and displayed resilience like its neighbours in the face of the global crisis, chalking a 5.6 per cent growth for 2012.

The rebalancing of Malaysia's economy towards greater domestic demand - from its dependence on trade - has led to a significant deterioration in Malaysia's external current account balance, to a surplus of about six per cent of gross domestic product (GDP) last year, compared to 11 per cent in 2011.

The IMF released the details of its annual assessment last Friday together with its first financial sector assessment programme for Malaysia, which endorsed the resilience of the well-capitalised financial sector.

Malaysia's growth story was better than what the IMF expected.

"We are happy with the developments for the near term but there are challenges on the fiscal front for the economy to realise the growth level of 2020."

The government's revenue base needs to shift from the oil and gas receipts, which account for about a third of the total.

The planned goods and services tax would help broaden the revenue base, while the gradual rationalisation of the subsidies programme would help reduce spending pressures while staggering the impact on inflation and incomes.

In the case of investments, he said to sustain the current levels, there must be concerted efforts towards structural reforms, including education to help reduce its skills gap and increase the contribution of human capital.

The report said the Fund welcomed the introduction of a minimum wage this year, which should support the incomes of poorer workers, and recommends considering the introduction over time of unemployment insurance and reforms to the pension system to further strengthen social protection.

Government debt is expected to decline gradually relative to GDP over the next five years, reaching about 51 per cent of GDP by 2017.

The Fund has recommended that there be more "front-loaded" consolidation efforts to reduce the probability of breaching the debt ceiling and ensure the government's goal of reducing debt to 40 per cent of GDP by 2020.

Balakrishnan said while the target to reduce debt is lauded, it is also important that there be more transparency in the concrete measures that Malaysia plans to undertake.

Contributed by Rupa Damodaran Business Times

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Penang's economy growth declines to 1.8% in 9 months 2012

GEORGE TOWN: Penang’s economy slowed down in the first nine months of the year, said Deputy Finance Minister Datuk Donald Lim.

“The state’s Gross Domestic Product (GDP) growth of about 5.7% in 2008 has dropped to 1.8% from January to September this year.

“The poor GDP record has put Penang, which used to record one of the highest growth rates in the country, in seventh position behind places like Kuala Lumpur and and Johor,” he said.

Lim said Johor recorded a GDP growth of more than 6%, exceeding the national average of 5.3%, adding that 1.8% was below average and the Chief Minister (Lim Guan Eng) had to answer for this.

“By right, Penang should be doing very well as many people are flocking to the state which has a service-skilled workforce.

“I’m surprised that Penang has done so poorly,” he said at the Malaysian Economy and 2013 Budget Economic Forum at a hotel here Saturday .

Asked why the Penang economy recorded such a slow growth, Lim quipped, “Probably he (the Chief Minister) didn’t work hard enough!”

“Perhaps his methods and direction are wrong or that he didn’t do enough homework. Maybe he is too busy with other things.

“I’m not saying that he’s not doing his job, this is for the rakyat to decide,” he said.

Lim added the Ministry of Finance was forecasting the last quarter of the year to record a GDP of about 5.2%.

He assured Malaysians that the country’s economy was not headed towards bankruptcy as speculated by certain quarters.

“We have a RM456bil debt as of last year but our revenue is RM881bil, and we incur a deficit of about 58.2%.

“Our economy is doing much better compared to our Asean counterparts such as Singapore which has a deficit of 107%. Even countries like the United States and those in European Union are suffering from a higher debt.

“Malaysia practices an open economic policy and as of Oct 15, our foreign reserve has reached RM424bil, making us the 19th biggest foreign reserve country in the world,” he said.

The forum, organised by the MCA Bukit Gelugor division, was attended by some 300 people comprising Barisan Nasional division leaders, community leaders and businessmen.

Also present were Penang MCA deputy chairman Datuk Dr Loh Hock Hun, Bukit Gelugor MCA division chairman Datuk Koay Kar Huah and Komtar Barisan co-ordinator Loh Chye Teik. - The Star

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Malaysia's growth forecasts raised after the actual 5.4% in Q2, 2012

 Malaysia's economy up 5.4% in Q2, manufacturing, demand support growth 

KUALA LUMPUR: Malaysia's economic growth, as measured by gross domestic product (GDP), for the second quarter ended June 30 rose by an unexpected 5.4% year-on-year, underpinned by an expansion in manufacturing and robust domestic demand.

GDP growth for the first quarter was revised to 4.9% from 4.7%, while growth for the first half of the year stood at 5.1% compared with the same period a year ago. Compared with the first quarter, GDP expanded by 3%.

In the supply side of the economy, only the agricultural sector saw a contraction due to lower crude palm oil production. Manufacturing, services, construction and mining all posted growth. Domestic demand jumped 13.8% for the quarter and rose 11.8% for the first-half.

The country's second-quarter GDP numbers came as a surprise to many economists, whose median forecast was for a 4.6% expansion. Growth for the quarter even exceeded the most optimistic forecast of 5.2%.

Zeti (far right) attending the briefing. With her are other Bank Negara officials

Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said at a briefing following the release of the GDP data that the surge in private investment was the most encouraging aspect of the economy.

“Private investment has made a strong return because the investment climate has improved tremendously, with Malaysia moving up the rankings of various surveys in terms of competitiveness, costs and ease of doing business,” she said.

Zeti said the improvement was underscored by the higher implementation of investments by domestic and foreign investors. She added that civil engineering projects in the oil and gas, transport, utilities and services industries had helped spur growth in the construction sector.

By numbers, investments from the public and private sectors jumped 26.1% year-on-year for the quarter under review, with the first half rising 21.3%.


By sector, private investments rose 24.6% while public investments surged 28.9%. For the first half, private sector investments grew 22.4% while public sector investments expanded 19.5%.

Consumption rose 8.9% for the quarter and 11.8% in the first half. By sector, private consumption increased 8.8% for the quarter and 8.1% for the first half while public consumption expanded 9.4% for the quarter and 8.4% in the first half.

Zeti said monetary policy continued to be supportive of growth and that for the rest of the year, risks weighed on growth rather than on inflation with external headwinds still overshadowing the outlook.

She said it would take time for the global economy to recover and this would need action from various stakeholders.

“At this point, we're maintaining our forecast of 4% to 5% GDP growth for the year but this may change when the budget is announced (on Sept 28). This will come in at the upper range of the forecast if growth is robust,” Zeti added.

Alliance Investment Bank Bhd chief economist Manokaran Mottain has revised GDP growth for the year to 4.7% from 4.5% previously, with the second half to record growth of 4.5%.

He told StarBiz the third quarter would see expansion at its slowest.

Manokaran said despite the surprising growth figures, the global and domestic economy's outlook for the rest of the year would still be dampened by the eurozone debt crisis, slower expansion in China and tepid growth in the United States.

“We believe the eurozone crisis will continue to have an impact on trade and this will show itself in slower exports growth,” he said.

He added that with a drop in manufacturing activity, sentiments would be affected, leading to slower growth in the domestic-oriented services sector as consumption slowed.

Manokaran said Purchasing Managers Index (PMI) for July indicated that exports would slow as demand dropped in developed markets.

CIMB Investment Bank Bhd economic research head Lee Heng Guie said in a report that the leading index for June suggested that the economy could weaken in the second half.

“We caution that a sharply high base in the second half of last year poses a hurdle to year-on-year growth,” he said.

He pointed out that the global Organisation for Economic Co-operation and Development composite leading together with regional high-frequency indicators, including trade and PMI, were still under external pressures.

Meanwhile, the Statistics Department released data showing that July prices as measured by the Consumer Price Index gained 1.4% year-on-year to 104.8 and remained unchanged compared with the previous month.

By FINTAN NG fintan@thestar.com.my The Star/Asia News Network

Economists turn bullish following better-than-expected growth in Q2

 
PETALING JAYA: Several economists have raised their gross domestic product (GDP) forecasts for Malaysia following better-than-expected growth for the second quarter ended June 30.

Malaysia's economic growth for the second quarter rose by an unexpected 5.4% year-on-year underpinned by an expansion in manufacturing and robust domestic demand.

GDP growth for the first quarter was revised to 4.9% from 4.7%, while growth for the first half of the year stood at 5.1% compared with the same period a year ago.

Compared with the first quarter, GDP expanded by 3%.

Hong Leong Investment Bank's (HLIB) research unit said that following the strong-than-expected second quarter data, it had raised its full-year 2012 GDP forecast to 5% (previously: 4.5%).

For the second half of 2012, HLIB Research expected GDP growth to dip to 4.5% year-on-year in the third quarter (dragged by subdued trade and manufacturing and higher base in the third quarter of 2011) before improving to 5.1% year-on-year in the fourth quarter, yielding an average of 4.8% year-on-year (first half: 5.1% year-on-year).

“We are still positive that line-up of the Economic Transformation Programme projects for the second-half and 2013 could still provide a strong support to GDP growth despite external uncertainty,” said HLIB Research.

According to Bloomberg, Goldman Sachs also raised Malaysia's GDP growth predictions to 4.6% from 3.8% for 2012, and to 5.3% from 5.2% for 2013.

Meanwhile, CIMB Investment Bank Bhd economic research head Lee Heng Guie said given the steady performance in the first half, he had raised the 2012 growth estimate to 5%, from 3.8% previously.

“However, this still implies a slower growth of 4.5% to 5% in the second half versus 5.1% in the first half,” said Lee in a report.

Lee warned that external headwinds still warranted caution as they remained hurdles to Malaysia's export growth.

Meanwhile, Maybank Investment Bank (IB) Research said its 2012 and 2013 growth forecasts of 4.4% and 5.1% respectively were under review.

“Provisionally, we expect 2012 growth to be around 5%, which implies a slightly slower growth of 4.8% in the second half as the global purchasing managers index in July signals that the global economy hence external demand will remain soft in the third quarter.”

Maybank IB Research said domestic demand would continue to be well supported by initiatives to sustain consumer spending, policies and measures to spur investments, and the roll-out and progress of big ticket infrastructure projects and capital expenditures in industries like oil, gas and energy.

By THOMAS HUONG huong@thestar.com.my The Star/Asia News Network

Malaysian GDP grew 4.7% in Q1, 2012

Malaysia's economic growth slowed to 4.7 percent in the first quarter, the government said Wednesday, due to weakening exports sparked by a stuttering global economy and debt woes in Europe.

The slower expansion in the export-dependent Southeast Asian country came after the economy grew at a 5.2 percent clip in the fourth quarter of 2011.

Malaysia is one of the fastest growing developing countries

"Domestic demand remained firm, supported by both private and public sector economic activity, while exports moderated amid weaker external demand," Bank Negara, the central bank, said in a statement.

The bank has projected growth to expand four to five percent this year, slower than the 5.1 percent seen in 2011.

Economists said the slower growth indicated that the economy was "moderating at a better pace than expected" in light of the eurozone crisis.

"One of the headwinds hitting not just Malaysia but also regional economies is the very weak growth in Europe with some countries mired in recession," said Yeah Kim Leng, chief economist with financial research firm RAM Holdings.

"The concern here is of course the slowdown is affecting Asian exports including Malaysia, given its sizeable export sector."

But Yeah said he expected the Malaysian economy to grow at 4.6 percent in 2012, backed by strong domestic demand.

In early May, the central bank kept its key interest rate at 3.0 percent for the sixth time in a row to drive domestic demand.

Inflation was 2.3 percent in the first quarter and is expected to moderate to 2.5-3.0 percent for 2012 amid lower global commodity prices and modest growth in domestic demand.

The central bank said that while the challenging external environment would remain a risk to Malaysia's growth prospects, "domestic demand is expected to remain resilient".

Prime Minister Najib Razak, who must call fresh elections by April 2013 and faces a strengthening opposition, has set a goal of Malaysia becoming a "high-income developed nation" by 2020.

He said last year that annual growth of at least 6.0 percent was needed to achieve that.

Under the plan, Najib aims to double per capita income to 48,000 ringgit ($16,000) by 2020.

The government has promised major infrastructure projects and financial market liberalisation to attract foreign investment and boost growth, but critics say the results have been limited.

Malaysia could go bankrupt by 2019?

Why Malaysia won’t go bankrupt

TRANSFORMATION BLUES By IDRIS JALA idrisjala@pemandu.gov.my
 
The Government is not in dire financial straits right now. By all measures its finances are good, but as in any situation involving finances, this is not to say it cannot be better.

I AM frequently asked why I said Malaysia could go bankrupt by 2019. I have had many queries asking for clarification and this has become one of my transformation blues.

In charting out our transformation journey in 2009, one of the first things the Prime Minister and the cabinet did was to list our current status, say where we want to be and set up a programme for transformation to get us there.

Amongst the many things on the list was a need to rationalise subsidy and so we ran a lab to do this.

During our open day, we engaged the public on the lab recommendation on the subsidy rationalisation. I wanted to be as frank as possible and to make it clear what the consequences of inaction would be.

Perhaps I was too frank but what I said has been misrepresented on a number of occasions, and I have since been saddled and hobbled with an unnecessary problem.

Habitual critics latched on to a small part of one of my first presentations where I said we have to change our spending patterns for sustained fiscal health.

Against a backdrop of several caveats and conditions, I said that we would be bankrupt by 2019 IF we continued to increase our subsidies and borrowings the same way we did before and IF our economy grows at less than 3% annually.

I've worked in Shell for more than 20 years, a company that is famous for its scenario planning techniques.

In layman terms, scenario planning means describing a future that could either be “good, bad or ugly” and doing our best to achieve the “good scenario” and avoid the “bad and ugly”.

My statement was heavily qualified but little or no mention was made of the clear caveats that I had put forward.

I still stand by what I said and it is important that my statement is taken together with the conditions.

This statement has been taken out of context so many times that it really gave me the blues - I have been talking till I turned blue in my face explaining what I meant!

Let me say in the clearest terms that my intention then was to illustrate the consequences of inaction when faced with tough decisions. We cannot continue to subsidise the way we have.

Let me also state that the Government is not in dire financial straits right now. By all measures its finances are good, but as in any situation involving finances, this is not to say it cannot be better. Here's why.

Our debt as at end 2011 is 53.8% of gross domestic product (GDP the sum of goods and services produced in the country) and the budget deficit is better than the 5.4% target of GDP.

Compare this with Greece's debt which stands at 110% of GDP and a budget deficit of 13% and it is obvious that we are not anywhere close to a crisis.

Subsidy rationalisation

Globally, many economists are cautioning the Governments against rising national debts. In 2009 the year for which the figures I used when I talked about subsidy rationalisation we had to increase government spending via our “economic stimulus package” in the face of the world financial crisis caused by the sub-prime mortgage problem in the United States.

This had spill-over effects into 2010 as well. But the debt as a percentage of GDP has begun to level off while the budget deficit, again as a percentage of GDP, has begun to significantly decline and as our economy continues to grow. We are reversing the situation.

In a simplified system to assess whether countries are in a sovereign debt crisis, the Boston Consulting Group (BCG) uses a graphical representation to identify countries with a potential problem.

Public debt as a percentage of GDP is plotted on the vertical axis while surplus or deficit in the national budget as a % of GDP is plotted on the horizontal axis.

BCG identifies a potential problem looming if public debt is 100% or over of GDP while simultaneously the budget deficit is 10% or more of GDP (see chart).

The more a country is to the left of the chart and the higher on the vertical axis, the greater the risk of a potential debt crisis but note that a country has to be simultaneously in problem in both areas to be regarded as a big risk.

If you look at Singapore, public debt as a percentage of GDP is 100% in the problem area but only for one of the two criteria but there is hardly any budget deficit to speak of in the republic.

Nobody considers Singapore a financially troubled country.

For Malaysia, it is important to notice that it has moved to the right in 2011 compared with its position in 2009 and 2010 while there is hardly any upward movement. That indicates a move in the right direction.

Based on this analysis, we are better than the United Kingdom, the United States, Spain, Italy, Portugal and Japan, to name a few. We will get into the safe zone soon enough.

The problem I highlighted using 2009 figures, making the caveat that IF debt continued to increase at previous levels we can have a serious problem in 2019 and IF we grow less than 3% annually, does not exist anymore.

Making improvements

Why? Because we are making improvements on both counts.

Firstly, as a responsible Government, in 2010, we began the process of gradually reducing subsidies for fuel, sugar, electricity and so on, knowing fully well that this was unpopular.

Secondly, our GDP grew by 7.2% in 2010 and 5.1% in 2011 and that's an average of 6.2%; we are meeting our Economic Transformation Programme (ETP) target. Of course, we can and should do much more.

As I have pointed out in previous presentations very little of our subsidies amounting to billions of ringgit every year go to the poor, the rich get most of it. We must rationalise the subsidy system not do away with it and cut other extraneous expenditures.

However, we continue to help the poor via our GTP initiatives e.g. Azam programmes and BR1M for the low income households and rural infrastructure programmes.

On the other side of the equation, we must increase government revenue sources by introducing such measures as a goods and services tax (GST) and get more economic activity going. We can exclude necessities from the tax.

We are already succeeding. We have the ETP and we are growing our revenue we had additional tax revenue of RM26bil in 2011. This has allowed us to finance rakyat-centric programmes such as BR1M.

Why, if we continue to make progress by these measures, we may even be able to balance the budget come 2020 even though that will welcomingly surpass our own target.

I know there will be critics who will say that I have changed my mind on the bankruptcy issue. I haven't changed my position vis-a-vis scenario planning.

I always believe in describing the “good, the bad and ugly” scenarios (that hasn't changed) i.e. the “good” scenario is if we successfully implement our ETP, we will achieve high income status by 2020.
The “bad or ugly” scenario is if we don't do anything to avoid it, then we can go bankrupt.

The fact is we are doing a lot of things to transform our country. So, we will not go bankrupt.

With the implementation of the ETP, we must acknowledge that Malaysia is on the right track in transforming its economy. The average annual GDP growth in two years (2010 and 2011) is more than 6%. In 2011, we met our GNI and investment targets, trade reached a record high of RM1.27 trillion in 2011.

We cut our deficit in 2011. In April, our PM will be releasing our ETP and GTP annual reports which provide all the details of our country's achievement.

Let me conclude by quoting Dale Carnegie: “It is tragic when we put off living. We dream of a magical rose garden over the horizon and miss the roses blooming outside our windows”.

Datuk Seri Idris Jala is CEO of Pemandu and Minister in the Prime Minister's Department. Fair and reasonable comments are most welcome at idrisjala@pemandu.gov.my

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Unconventional Thinking: Small is Beautiful!

Cover via Amazon

Lessons from unconventional thinking

THINK ASIAN By ANDREW SHENG

AT a time when there is great awareness that mainstream economic theory is seriously flawed, many of us are looking for alternative models of economic thinking.

I have in my collection a book by an English economist EF Schumacher called Small is Beautiful, first published in 1973, but never read it. Last month, I finally read it and was overwhelmed by its brilliant and unconventional approach to economic thinking.

The book became almost cult reading when it came out 40 years ago, in the aftermath of the first energy crisis.

The author was a Jewish refugee from Germany to England who studied in Oxford and Columbia Universities. He became the Economic Advisor to the British National Coal Board and was sent in 1955 to work in Burma as an economic development advisor.

It was from his experience there, including staying in a Buddhist monastery that he evolved highly a non-Western way to consider human development, including living within the limits of natural resources and using intermediate technology.

This explains why Chapter 4 of this book was called Buddhist Economics.

The book is actually a collection of essays written at different times. Like his teachers, Keynes and John Kenneth Galbraith, Schumacher wrote in elegant and striking prose:-

“One of the most fateful errors of our age is the belief that the problem of production has been solved. The illusion... is mainly due to our inability to recognise that the modern industrial system, with all its intellectual sophistication, consumes the very basis on which it has been erected. To use the language of the economist, it lives on irreplaceable capital which it cheerfully treats as income.”

He immediately plunges into an attack on the whole philosophy of modern economics that reduces everything into monetary values as measured by GDP, arguing that the logic of limitless growth is wrong: “... that economic growth, which viewed from the point of view of economics, physics, chemistry, and technology, has no discernable limit must necessary run into decisive bottlenecks when viewed from the point of view of the environmental sciences. An attitude to life which seeks fulfilment in the single-minded pursuit of wealth in short, materialism does not fit into this world, because it contains within itself no limiting principle, while the environment in which it is placed is strictly limited.”



Being a system-wide thinker, he deplored the narrowness of economics:-

“Economists themselves, like most specialists, normally suffer from a kind of metaphysical blindness, assuming that theirs is a science of absolute and invariable truths, without any presuppositions.”

He was probably the earliest to recognise that the concepts of GDP ignored the costs of depletion of natural resources and the high social damage through pollution: “It is inherent in the methodology of economics to ignore man's dependence on the natural world.”

Most recent reviewers of his book commended him on the accuracy of his forecasts (forty years ago) on population and the rate of consumption of energy resources.

Some reviewers consider that the book brilliantly explained the “Why” of the need to conserve, but not the “how”. I think he went deeper than that.

Schumacher was not just a social philosopher but a practical observer of large scale social organisations, particularly bureaucracies. The realist side of him can be found from this quote: “An ounce of practice is generally worth more than a ton of theory.”

Indeed, he was very insightful of the importance of smallness in large organisation. This was because as organisations become larger and larger, they become more impersonal.

He recognised the inherent contradictions within large organisations that have alternating phases of centralising and decentralising.

Here, he noted that the solution is not either-or, but the-one-and-the-other-at-the-same-time. In other words, contradictions and illogical situations are inherent in large systems.

This is because all organisations struggle to have “the orderliness of order and the disorderliness of creative freedom.” Every organisation struggles with the orderly administrator versus the creative (disorderly) entrepreneur or innovator.

From this basic contradiction, Schumacher has a theory of large-scale organisation divided into five principles, which are worthwhile researching further.

The first principle is Subsidiarity which is that the upper authority should delegate to the lower level powers where it is obvious that the lower levels can function more efficiently than the central authority.

The second principle is Vindication namely, governance by exception. The centre delegates and only intervenes under exceptional circumstances which are clearly defined.

The third principle is Identification the subsidiary must have clear accounting in the form of balance sheets and profit and loss account.

The fourth principle is Motivation here he recognises that motivation at the lower levels of large organisation is low if everything is directed from the top. This is where the values of the organisation become critical in addition to rewards in terms of money.

The fifth is the Principle of the Middle Axiom. He notes that “the centre can easily look after order; it is not so easy to look after freedom and creativity.”

The word “Axiom” means a self-evident truth. The Principle of the Middle Axiom is “an order from above which is yet not an order.”

In practical terms, you set out an objective, but do not detail and direct how that objective is to be achieved, giving some degree of innovation and freedom for the subsidiary levels of the organisation to achieve the objectives.

What is amazing is that 40 years ago, Schumacher quoted Chairman Mao for the best formulation of the necessary interplay between theory and practice: “Go to the practical people, learn from them; then synthesise their experience into principles and theories; and then return to the practical people and call upon them to put these principles and methods into practice so as to solve their problems and achieve freedom and happiness.”

All these sound very simple, but are actually quite hard to practice. Schumacher has certainly convinced me that there are good alternatives to current conventional economic thinking.

Tan Sri Andrew Sheng is President of the Fung Global Institute (as@andrewsheng.net)

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