Wednesday, June 26, 2019

NEOLIBERALISM, SYSYEM OF THE GOOD, THE BAD AND THE UGLY

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By: Ang Eng Tat

Many people do not know the word neoliberalism. To understand what haunted this country for more than 30 years, you need to understand this word before anything. The word is based on Laissez-Faire economic philosophy and doesn’t confuse it for political ideology Liberalism.

NEOLIBERALISM first made its appearance in the 1970s where the world recovered itself from the destruction of World War II. It is an economic philosophy that has always associated with smaller government spending, privatisation (corporatize government agency and sell the shares), reduce tax rates like sales tax, import duties tax or corporate tax, and deregulation (lesser intervention of state towards private sectors). All of these will increase the role of private sectors in the society.

After World War II, the entire world was a struggle to rebuild themselves. Therefore, the government plays a role to rebuild the nation. Our country is no exception. Tunku Abdul Rahman was the first prime minister and he focused his role in anti-communist policy and focused on the formation of Malaysia.

When Tun Abdul Razak became prime minister, the government borrowed a lot of money to spend on setting up a national-owned corporation or government agencies.

For example, Lembaga Letrik Negara, Heavy Industries Corporation of Malaysia, Jabatan Kerja Raya and more. These agencies or corporations’ objective was to build the country and to serve the people’s need which are the needs of electricity, clean water, education, infrastructures and although the most significant policy was Malaysian New Economic Policy which started by him to help the Malays to come out from poverty but it was a good intention. However, he didn’t last long enough to oversee his policy due to leukaemia disease.

The third Prime Minister, Tun Hussein Onn then continued to oversee his predecessor’s policies. Unfortunately, due to the health issue, he resigned in 1981 and the premiership taken over by Tun Dr Mahathir.

Although Tun Hussein Onn didn’t stay in office for a long time, one of the policies he started was Amanah Saham Nasional. With the idea from Tengku Razaleigh, a company set up as the first and the largest unit trust schemes. It was to help the Bumiputera.

Tun Dr Mahathir, known as the Father of Modernisation. In his era of the Premiership, our country was in rapid modernisation and rapid economic growth. NEOLIBERALISM policies of him actually helped the economic growth and privatisation was his main policy.

From highways to telecommunication, he privatised most of them. Those privatised corporations ended up monopolise the market. Unhealthy competition or no competition in the market will only make the people suffer.

At the early period of Tun Dr.Mahathir’s ruling, the privatisation started with some reasons. It was to reduce government’s burden and to increase the efficiency of companies. The government spent a lot of money on the civil servants’ salaries and also the cost of operations of companies.

The public owned companies were based on serving the need. Some companies could make profits but not all. To solve this problem, he then started to privatise government agencies and that made some individuals became the top ten rich men in our country.

Proton is a significant example of a government agency that’s been corporatized and later he sells off the shares. It was started under the National Car Project which approved by the cabinet. It was fully owned by the government through Khazanah Nasional.

Proton was somehow successful at first but it was losing money several times. It was sold 100% to DRB-HICOM which make Proton entirely a private company.

Although it became a private company, the government will still give money to Proton to bail out of debt. When government no longer want to bail them out, DRB-HICOM sold 49.9% of shares to Geely, a China automobile company.

Everyone was mad at the government for selling of Proton but the reality is the government has no role in the transaction of Geely and DRB-HICOM. The fact is DRB-HICOM is a private company and a few government agencies have some shares in it.

Imagine all the money that spent on Proton is use on the development of public transport and we will be having world-class public transport a few years earlier.

Proton was just one of the examples. Privatisation somehow helped the economic growth but privatisation will also hurt the economic growth if it is out of control. Just like Malaysia Airlines (MAS), it was sold to Tajudin Ramli in 1994 and it was RM12 billion in debt in 1998.

The debt was so worrying, the government had to spend money to buy back the shares. It was then in a financial crisis in few times and the government again spent money to buy the shares. However, MAS is now 100% fully owned by the government under Khazanah Nasional and now it is making profits.

Light rail transit or LRT, was launched in Malaysia in 1998. Both lines are known as STAR-LRT and PUTRA-LRT. To solve this problem, again government started a public company, Prasarana Malaysia and took over these two LRT lines alongside with some bus companies.

Both lines were then renaming as Kelana Jaya line and Sri Petaling line and now operated by Rapid Rail Sdn Bhd, one of the subsidiaries of Prasarana Malaysia.

Same thing happened to KL Monorail, it was owned by a private company, KL Infrastructure Group in 2003. Then, the company couldn’t pay off the loan and Prasarana took over the KL Monorail in 2007.  The purchase of the monorail also made Prasarana took over the RM 882 million loan. Money wasted on all these because of privatisation and it could be avoided.

Above all these, they have already involved billions of Ringgit, and perhaps we could have world class public transport by now or a better education system if we didn’t simply spend all those money.

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