Tuesday, October 26, 2010


blogtunm.blogspot.com Tun M 
1. The Prime Minister has announced that Malaysia should develop into a high income economy. In the past we had stressed low cost because we wanted to attract Foreign Direct Investment through low wages for our workers. That was a good strategy because we were trying to solve our high unemployment problem.

2. We were so successful in creating jobs that we have to import foreign labour. We were effectively helping to solve the unemployment problem of other countries.

3. Our cost of labour is now higher than our neighbours and of course against China and Vietnam.There is no way we can compete with them. If our labour cost increases further, especially if we want to have a high income economy, we can no longer compete for FDI, at least the labour intensive ones.

4. When we increase incomes it will not be only wages and salaries which will increase, profits as income must also increase. Government can quite easily pay high salaries and wages. But even for the Government the money must come from somehwere.

5. Unless Government revenues increase, the money will have to come from reduction in development expenditure. This may not be welcomed by the people.

6. For the private sector the money can come from more efficient management, higher productivity through more efficient output by workers or through investments in better machinery and equipment. Almost invariably the higher wages and salaries will increase cost and therefore the prices of goods and services.

7. Higher income will therefore result in higher cost of living. This will reduce the purchasing power expected of higher incomes. This would be meaningless unless the increase in cost of living will be less than the increase in incomes.

8. Unless the increase in incomes is properly managed, it will not enrich the people in terms of purchasing power. As the cost of living rises, the increases in income may not purchase more than what the previous lower income would. Indeed it may be possible that the increases in income will actually purchase less goods and services than the previous low income.

9. We see today the purchasing power of the developed countries with much higher income than us. The United States is said to have a per capita income of USD36,000, roughly five times Malaysia’s USD7,000 per capita. But the people are not five times richer than Malaysians in terms of purchasing power. In fact in certain cases the purchasing power is the same as Malaysians. According to the McDonald’s Hamburger Index, the Ringgit is the same as the US Dollar in purchasing McDonald’s hamburger – one Ringgit will buy in Malaysia what USD1 will buy in the US.

10. Clearly the increased income in high-cost countries does not give an increase in purchasing power equal to the increase in income as compared to low-cost countries. It is important that the Malaysian public understand this.

11. Malaysians are very sensitive to price increases, in many cases illogically. When crude oil increased in price from USD30 per barrel to USD140, Malaysians expect the pump price of petrol to remain the same. This is illogical. Surely the increase in crude price will be reflected in the retail petrol price.

12. The Government can subsidise. But when Government subsidises it must tap the money from other allocations. Perhaps it can use the extra profits from the sale of Malaysian crude in the market. But this would not be enough as we consume three-fourth of our oil and sell only one quarter. From the sale of one quarter of our oil, we cannot fully subsidise three quarters that we sell at the old price.

13. There must therefore be an increase in the price of retail oil. Malaysians must accept reasonable price increases when incomes and profits are increased on our way to becoming high-cost developed country. There is no way we can continue to enjoy low cost of living while we ensure we earn high incomes.

14. A high-income economy must therefore also be a high-cost (of living) country. But with good management the high incomes would increase our purchasing power to some extent, especially in the purchase of imported goods and services and when traveling abroad. There should be also a certain increase in purchasing power in the country. In effect despite higher cost of living we will still enjoy higher purchasing power and a higher standard of living.

15. I am all for the Government’s high income policy. My worry is that the people may expect high income without the accompanying high cost of living. It is better for them to be forewarned.

Wednesday, October 20, 2010


blogtunm.blogspot.com Tun M 
1. Malaysians, including Malaysian monetary authorities seem quite happy over the appreciation of the Ringgit against the US Dollar. We think that when our currency strengthens it must be because our economy is strong. Therefore we are doing well.

2. But are we doing well? Is it the Ringgit which is appreciating or is it the US Dollar which is devaluing?

3. Actually it is the US Dollar which is devaluing. It is devaluing against most other currencies, especially against China’s currency.

4. Why is the dollar devaluing? Could it be the currency traders are selling dollars? Could it be because the balance of payment is not in US favour?

5. Martin Wolf of the Financial Times, an expert on money has this to say. There is a global currency battle going on. “To put it crudely,” he says, “the US wants to inflate the rest of the world, while the latter is trying to deflate the US. The US must win, since it has infinite ammunition; there is no limit to the dollars the Federal Reserve can create. What needs to be discussed is the terms of the world’s surrender; the needed changes in nominal exchange rates and domestic policies around the world.”

6. Our reserves are represented by the US Dollar, Gold and other currencies which we keep in order to back the value of our Ringgit. The US clearly does not have to hold foreign currencies to back the Dollar. All the US has to do is to create (print) money.

7. When we buy US Dollar bonds, we are in fact lending US Dollars to the US. When we redeem the bonds all the US has to do is to print more dollars to pay us. We are actually exchanging hard-earned money for pieces of paper which some people call toilet paper.

8. I wonder what Malaysia is doing during this currency war. Are we still keeping US Dollars as our reserves? Have our reserves depreciated because the US Dollar has depreciated?

9. Many countries are now “controlling” their currencies. Are we going to go the other way – to remove the last remnants of our control?

10. As I said in a previous article, the daily trade in currency amounts to 4 trillion dollars. Are we going to contribute to that trade?

Wednesday, October 13, 2010


blogtunm.blogspot.com Tun M 
1. I would like to apologise to the students and others for failing to turn up to give the talk I had agreed to.

2. I would also like to thank those who sent get well messages, fruits and flowers while I was in hospital in Melbourne.

3. Honestly I feel I have lost an opportunity to meet and talk to what may be the future leaders of Malaysia. For this reason I am writing down here what would have been the contents of my talk.

4. The suggested topic for my talk was, “Are we ready for 1 Malaysia: Does Race Still Play a Part?”

5. I will be frank but factual. My only interest is the country we all love. I am past self-interest.

6. First let me refer to the slogan “1 Malaysia”.

7. Without the Government spelling out the precise meaning of 1 Malaysia, different people are giving their own interpretations which not only differ from each other but are in conflict with each other.

8. The Malays generally interprete 1 Malaysia to mean real adoption of the national language as the home language by every citizen as happens in other multiracial countries. They also expect the abolition of Chinese and Tamil schools and ensuring the private sector has a fair participation of Malays and other Bumiputeras.

9. The Chinese and Indians interprete 1 Malaysia to mean amendments to the constitution to eliminate provisions for the special treatment of the Malays and their protection by the Rulers, removal of the quota for Malays in the Civil Service, termination of the NEP, termination of the 30 per cent quota for Malays and indigenous people in business, termination of the quota for awards of licences, contracts and Aps. All awards to be on a competitive basis and open to all irrespective of race. They also expect perpetuation and maintenance of Chinese and Indian schools by the Government.

10. These two interpretations of 1 Malaysia admittedly are by the more extreme groups. The more moderate ones from both sides are milder in their expectations but their minimum intetrpretations still provide irreconcilable conflicts. 1 Malaysia clearly means different things to the different races.

11. This is the present position and it is obvious that race still play a very important role.

12. Question: It is now more than 50 years since independence. For how long do the Malays expect to be treated as special and different from the other citizens?

Answer: For as long as the Chinese and Indians prefer to be identified with their countries of origins. For as long as they want to keep their home languages and their schools.

13. Question: The so-called social contract were made a long time ago. We were not involved and we cannot be bound by it forever. When can we ignore the social contract and draw up our own social contract?

Answer: When everyone agrees to throw out the old social contract and replace it with a new one.

This will take a long time. As the new contract will be between races, racial factors would be included. Unless both sides agree to give up their races’ own rights as spelt out in the first contract i.e. the preservation of own home languages and schools etc. the rights of the indigenous races to their special position etc must remain a part of the new social contract.

It is not certain that each would not demand for more than what they got under the old contract. It is likely there would be no agreement and no contract. Ths would lead to perpetual conflicts.

14. Question: So there will be no solution. The racial divisions and conflicts will remain.

Answer: In Vision 2020 one of the objectives is to create a bangsa Malaysia.

The belief at that time was that if Malaysia becomes a fully developed country, it would become very prosperous.

This prosperity would be fairly shared between the races. There would be less jealousy between them. There would also be less fear of any race being dominated by any other race.

The political cooperation between the races would also be made more meaningful as loyalty to the country would override other loyalties. In fact non-racial parties would be the trend.

It would take a long time perhaps – depending on fair wealth distribution. But once it takes off the pace will increase.

Malaysians of all races would be so proud of their country and its great achievements that the desire to be linked with other countries would be much diminished if not disappear altogether (as happens in prosperous multi-racial countries like the US – where the German, Eisenhower led the war against Germany. Eisenhower was American first and his country of origin was irrelevant to him).

The Malaysians at that stage would be Bangsa Malaysia first and always. The thing to do now is to ensure prosperity for the country and its fair distribution. Removing current rights of any of the races at this moment will only lead to racial conflicts which would obstruct prosperity.

15. Question: There are Malays in the opposition who condemn the NEP as unfair discrimination.

Answer: There are also Chinese and Indians who appreciate what the Malays have done and support the NEP. They are not so vocal for obvious reasons.

One should look at the Malays who condemn the NEP. If they are politicians or supporters of certain parties their views are motivated by a desire to get Chinese support. They assume that they themselves would lead the nation and enjoy power and opportunities through Chinese support. But there will be a pay-back period. The support is not for free. The Malay leaders will be like Nizar (Jamaluddin) when he was Menteri Besar of Perak – mere puppets.

The non-politically educated Malays feel ashamed that they have to be helped. They would like to be recognised as people who succeeded on their own.
If we study these people almost invariably they have benefited from the NEP. They appear to be ashamed of this.

They are ashamed to admit that they were unable to compete with the other races.
I am not ashamed to admit that I cannot compete with the Chinese and Indian students when studying medicine. They had much better results than me and the other six Malay students for entry into the Medical College. Even at that time the British promised to the Rulers to help educate the Malays. I had my chance because of the affirmative action then. On pure merit I would not be a doctor today, not because I was not qualified, but my qualification was lower than others.

One has to remember that the Chinese civilisation is more than 4000 years old. No other civilisation has lasted that long. Naturally they have developed a culture better able to survive under all conditions. It is my belief that if the percentage of Chinese in the United Kingdom for example is the same as in Malaysia, UK would be better developed than it is now. It is not surprising that the Chinese excel in developing Malaysia (for which they are amply rewarded).

It is not shameful to lose out against them. Simply to catch up with them we need handicaps. To be given handicaps is to ensure fairness, not discrimination. That is why in golf you have handicaps. That is why in all contests there must be equality between the contestants.

It is selfish if having benefited from the handicaps you want to deny others from having them.

But when all is said and done, those who are given the benefits of handicaps must make honest efforts to use them properly. If they don’t then they must forfeit the handicaps in the future.

Sunday, October 10, 2010


blogtunm.blogspot.com Tun M 
1. After three days in the Epworth Hospital, it was suggested that I be discharged but should continue treatment under the Hospital in the Home service.

2. The Home Hospital has a full staff of doctors, specialists and nurses. They will carry out the full hospital treatment, periodical medical examination and treatment, intravenous drips, physiotherapy etc. They do not stay with patients but would visit at the designated time and stay as long as necessary.

3. It is far better than house-call by doctors as they can only give limited service. You feel you are being well looked after as in the hospital, but you have the ambience of home and family.

4. I don’t know if we have this service or not but I believe it can contribute to being a developed country.

5. Another service I experienced is the ambulance service. The two ambulance personnel are very highly trained to give first aid including CPR, proper handling of fractures, take blood pressure and heart rate, ECG and other signs and symptoms.

6. They handle their patients very competently, are in continuous communication with the hospital to ensure preparation for receiving the patients.

7. I believe an effort was made by local doctors to provide this kind of service in Kuala Lumpur. Unfortunately after the ambulances had been acquired the financiers backed out. The Return on Investment was not good enough.

8. The Government does not operate a full ambulance service. Nor do all hospitals provide such service.

9. There are now many hospitals in KL – both public and private. A good ambulance service can save many lives.

10. Maybe the Government could afford to support the superior ambulance service in one way or another – at least until they become viable. What we need is just one. If several such service is licensed, all would be likely to fail.
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