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? 

When will the Western-led global order catch up with the world …

 

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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Malaysia’s low wages: low-skilled, low productivity, low quality, reliance on cheap foreign workers! Need to manage!


Survey: Most workers not paid enough to achieve minimum acceptable living standard

 

Wages too low, says Bank Negara – Survey: most workers not paid enough to achieve minimum acceptable living standard

ALTHOUGH the income levels of Malaysians have increased significantly over the years, voices of discontent are mounting over the decline in purchasing power.

Low and depressed salaries are among the grouses of executives and non-executives amid the apparent lifestyle changes of Malaysians.

With the rising cost of living, they lament that there is now less room for long-term savings and investments.

According to the Employees Job Happiness Index 2017 survey by JobStreet.com, one in three Malaysian employees want a pay rise, with rewards constituting 52% of the domestic workforce’s motivation to work.

In its 2017 Annual Report, Bank Negara points out that the expenditure of the bottom 40% (B40) of Malaysian households has expanded at a faster pace compared with their income.

From 2014 to 2016, the average B40 income level grew by 5.8% annually, marginally lower than the 6% growth in the B40 household spending in the same period.

It is also worth noting that half of working Malaysians only earned less than the national median of RM1,703 in 2016.

The central bank, in consideration of the low-wage conundrum, has recently recommended that employers use a “living wage” as a guideline to compensate their employees for their labour.

Essentially, the living wage refers to the income level needed to achieve a minimum acceptable standard of living, depending on the geographical location.

Citing Kuala Lumpur as an example, Bank Negara estimates that the living wage in the city two years ago was about RM2,700 for a single adult. The living wage estimate for a couple without a child was RM4,500, while for a couple with two children, the living wage was RM6,500.

As much as Malaysians support higher wages, which can outgrow escalating living cost, the bigger question is whether their employers are willing to increase wages significantly.

Also, is it realistic for employers to pay higher salaries in line with the suggested living wage?

Speaking to StarBizWeek, Malaysian Employers Federation (MEF) executive director Datuk Shamsuddin Bardan says that the living wage is unsuitable for adoption in Malaysia – for now.

He believes that the living wage will turn out to be damaging to the domestic labour market, given the rising cost of doing business in recent times.

Shamsuddin: While employers in Malaysia are more than happy to compensate workers for their work, people must also understand that they are bogged down by escalating costs. << Shamsuddin: While employers in Malaysia are more than happy to compensate workers for their work, people must also understand that they are bogged down by escalating costs.
Shamsuddin: While employers in Malaysia are more than happy to compensate workers for their work, people must also understand that they are bogged down by escalating costs.

“The living wage concept is unrealistic in Malaysia for the time being. While employers in Malaysia are more than happy to compensate workers for their work, people must also understand that they are bogged down by escalating costs.

“However, if the workers are proactive and upskill themselves to increase their productivity, then I do not see any reason for employers to refrain from offering higher pay packages.

“The Government on its part, should not micro-manage the economy to the extent of telling the employers how much to pay their workers. Instead, the Government can provide various incentives to the employers to bring down costs, which will translate into higher salaries or even exempt the employees’ bonuses from tax,” he says.

Socio Economic Research Centre executive director Lee Heng Guie welcomes Bank Negara’s living wage guideline “to prevent a wage employee from the deprivation of a decent standard of living”.

In order to push for the acceptance of a living wage in Malaysia, Lee recommends that government-linked companies (GLCs) adopt the concept gradually.

“The enforcement of commitments toward the living wage is a complex and costly issue, and more importantly, should be paid voluntarily by the employers.

“This would require extensive consultations and engagements with the stakeholders.

“Perhaps, as one of the largest employers in the country, GLCs can incorporate the living wage clause in their suppliers’ procurement contracts,” he says.

Concerns about Malaysia’s low-wage environment are not only centred on the low-skilled workers but across-the-board, as even executives lament about being lowly-compensated.

Are Malaysians being paid enough?

Based on data from the Statistics Department’s Salaries and Wages Survey Report 2016, most Malaysian workers are still paid significantly lower than the desired amount to achieve “minimum acceptable living standard”, at least in Kuala Lumpur.

Nearly 50% of working adults in Kuala Lumpur earned less than RM2,500 per month in 2016, notably lower than the RM2,700 living wage as suggested by Bank Negara.

In fact, up to 27% of households in Kuala Lumpur earned below the estimated living wage in 2016.

While wage growth has exceeded inflation over the years, real wage growth has been largely subtle. Real wage refers to income adjusted for inflation.

According to the MEF’s website, the salaries of executives were expected to grow by 5.55% in 2017, compared with 6.31% in 2013. As for non-executives, the average salary was anticipated to increase by 5.44% in 2017, down from 6.78% in 2013.

Given the 3.7% headline inflation registered in 2017, executives’ salaries may have just inched up by 1.85% on average, after factoring in inflation.

As for non-executives, their real wage could have grown by 1.74%, lesser than the executives in Malaysia.

While a slight moderation in headline inflation is expected this year, the purchasing power of Malaysians is unlikely to improve significantly.

In an earlier report by StarBiz, Shamsuddin described 2018 as a “bad year for employees and employers”, and projected Malaysians’ average salary increment to be lower than last year.

He blamed several new policies and measures introduced by the government such as the mandatory requirement for employers to defray levy for their foreign workers and the introduction of the Employment Insurance System, which would increase the costs borne by domestic businesses.

“It will be difficult for employers to raise salaries after this, given such dampeners,” he was reported as saying.

The biggest challenge now is to strike a balance between the market’s ability to compensate a worker and the worker’s required income level to achieve a minimum acceptable standard of living.

Sunway University Business School professor of economics Yeah Kim Leng says that more efforts have to be made to enhance the business and investment climate, in order to entice existing firms to expand and upgrade while new firms and start-ups emerge to create more high-paying jobs.

Yeah: A good quality and inclusive education system coupled with sound economic policies and effective implementation have enabled the two countries to sustain growth. << Yeah: A good quality and inclusive education system coupled with sound economic policies and effective implementation have enabled the two countries to sustain growth.
Yeah: A good quality and inclusive education system coupled with sound economic policies and effective implementation have enabled the two countries to sustain growth
.

He also calls upon business owners and employees to forge appropriate wage-setting mechanisms, which are benchmarked against the productivity of the workers.

“The Government should consider additional fiscal incentives for firms that provide worker benefits to meet the living wage standard. For example, double tax deduction for transport allowance and other cost of living adjustments for the lower-salaried employees,” states Yeah.

Meanwhile, Lee opines that employees should be given a higher share of the profit generated by their employers moving forward, in line with the practice in many high-income nations abroad.
 

“It is actually reasonable for Malaysian employers to allocate a larger chunk of their profits to reward their workers and motivate them,” he says. 

In 2016, the compensation of employees to gross domestic product (CE-to-GDP) ratio in Malaysia improved to 35.3%. The CE-to-GDP ratio shows the workers’ share in the profits made by business owners.

For every RM1 generated in 2016, 35.3 sen was paid to the employee and 59.5 sen went to corporate earnings, while five sen was given to the government in the form of taxes.

In its 11th Malaysia Plan, the Government aspires to increase the CE-to-GDP ratio substantially to 40%, from 34% in 2013.

While Malaysia’s CE-to-GDP ratio has continued to improve over the years, it is notably lower than several other high and middle-income countries.

The 11th Malaysia Plan document stated that the country’s CE-to-GDP ratio was lower than Australia (47.8%), South Korea (43.2%) and even South Africa (45.9%).

In an earlier media report, however, Malaysian Institute of Economic Research executive director Zakariah Abdul Rashid hinted that Malaysia was unlikely to reach its CE-to-GDP ratio target by 2020.

This was mainly as a result of Malaysia’s lower-than-expected productivity growth.


Low-wage conundrum

 According to Bank Negara, the main underlying cause of Malaysia’s low-wage environment is the high numbers of cheap foreign workers.

Governor Tan Sri Muhammad Ibrahim says that the country should cut back on its foreign worker dependency to drive higher wages for Malaysians across-the-board.

“In Malaysia, our salaries and wages are low, as half of the working Malaysians earn less than RM1,700 per month and the average starting salary of a diploma graduate is only about RM350 above the minimum wage.

“It is high time to reform our labour market by creating high-quality, good-paying jobs for Malaysians,” he says.

Echoing a similar stance, Yeah says that the continuing reliance on foreign workers has resulted in a predominantly low wage-low productivity-low value economy, with many features of a middle-income trap.

“On one end of the wage-skill spectrum, the low-skilled jobs are being substituted by easy availability of unskilled foreign workers, thereby keeping the blue-collar wages from rising.

“At the other end, skilled job wages are being depressed by insufficient high-wage job creation, weak firm profitability amid rising market competition and excess capacity, industry consolidations and other factors resulting in a slack labour market,” he says.

Lee: The enforcement of commitments toward the living wage is a complex and costly issue, and more importantly, should be paid voluntarily by the employers. << Lee: The enforcement of commitments toward the living wage is a complex and costly issue, and more importantly, should be paid voluntarily by the employers.
Lee: The enforcement of commitments toward the living wage is a complex and costly issue, and more importantly, should be paid voluntarily by the employers.

It is worth noting that the share of high-skilled jobs has reduced to 37% in the period from 2011 to 2017, as compared to 45% from 2002 to 2010.

Malaysia has come a long way since its independence, transforming itself from a largely rural agragrian country to a regional economic powerhouse, which is driven by its strong services and manufacturing sectors.


While industrialisation and automation have grown robustly since the 1990s, economists feel that the country has not managed to substantially move up the value chain compared with other countries such as Singapore.

The lack of a high-skilled workforce, low productivity, employment opportunities to cater to high-skilled professionals and the presence of cheap foreign workers have all weighed down on the Malaysian economy, particularly the income levels of Malaysians.

Citing the examples of Singapore and Australia, which are successful in raising wages historically, Yeah says that structural reforms should be undertaken in Malaysia to reverse the low-wage conundrum.

“A good quality and inclusive education system coupled with sound economic policies and effective implementation have enabled the two countries to sustain growth, raise productivity and wages and shift to higher-value activities,” he says.

Sources: by Ganeshwaran Kana, The Star

Economist: Manage labour issues to achieve high-income economy

Cheap manpower: While Malaysia has clearly
benefitted from the presence of foreign workers, the role that foreign
workers play in the Malaysian economy must keep up with the times.

WHY are wages still low in Malaysia?

Well, there are six words to describe the main reason for this – “high dependence on low-skilled foreign workers”.

The issue of Malaysia’s huge reliance on low-skilled foreign labour has been raised time and again, but only moderate progress has been made in alleviating the situation.

Low-skilled foreign labour remains a prevalent feature of Malaysia’s economy, and according to Bank Negara, it is a major factor suppressing local wages and impeding the country’s progress towards a high-productivity nation.

As the central bank governor Tan Sri Muhammad Ibrahim puts it, Malaysia is currently weighed down by a low-wage, low-productivity trap, with the contributing factor being the prolonged reliance on low-skilled foreign workers.

While their existence may benefit individual firms in the short term, they could impose high macroeconomic costs to the economy over the longer term.

“Easy availability of cheap low-skilled foreign workers blunts the need for productivity improvement and automation. Employers keep wages low to maintain margins,” Muhammad says.

“Unfortunately, this depresses wages for local workers. The hiring of low-skilled foreign workers also promotes the creation of low-skilled jobs,” he adds.

From 2011 to 2017, the share of low-skilled jobs in Malaysia increased significantly to 16%, compared with only 8% in the period of 2002 to 2010. Apart from that, local economic sectors that rely on foreign workers such as agriculture, construction and manufacturing also suffer from low productivity.

Nevertheless, it is an undeniable fact that foreign workers do contribute somewhat to Malaysia’s economic growth.

The World Bank, in its study about three years ago noted that immigrant labour both high and low-skilled, continued to play a crucial role in Malaysia’s economic development, and would still be needed for the country to achieve high-income status by 2020.

The global institution’s econometric modeling suggested that a 10% net increase in low-skilled foreign workers could increase Malaysia’s gross domestic product (GDP) by as much as 1.1%. For every 10 new immigrant workers in a given state and sector, up to five new jobs may be created for Malaysians in that state and sector, it said.

Even so, the World Bank acknowledged that the influx of foreign labour did have a negative impact on the wages of some groups.

Its study found a 10% increase in immigration flow would reduce wages of the least-educated Malaysians, which represents 14% of the total labour force, by 0.74%. Overall, a 10% increase in immigration flow would slightly increase the wages of Malaysians by 0.14%.

According to Muhammad, while some argue that foreign employment creates economic activities, which consequently create jobs for local employment, it is neither the most efficient nor the desired route to create more mid-to-high-skilled jobs.

“Compared with local employment, foreign workers repatriate a large share of their incomes, which limits the spillover or multiplier effect on the domestic economy,” he explains.

Total outward remittances in 2017 stood at RM35.3bil, of which the bulk was accounted for by foreign workers.

In addition, Muhammad says high dependence on low-skilled foreign workers will also have an adverse effect of shaping Malaysia’s reputation as a low-skilled, labour-intensive destination.

Bank Negara says while Malaysia has clearly benefitted from the presence of foreign workers, the role that foreign workers play in the Malaysian economy must keep up with the times.

The central bank believes critical reforms to the country’s labour market are very much within its reach, and it should continue to gradually wean its dependence on foreign workers.

Malaysia should seize the opportunity now to set itself on a more productive, sophisticated and sustainable economic growth path, it says.

According to Muhammad, cutting back on foreign worker dependency can help to drive higher wages for Malaysians across-the-board.

The Government’s efforts in reducing the country’s dependency on low-skilled foreign workers have been ongoing since the implementation of the 8th Malaysia Plan (2001-2005), with greater clarity and a renewed focus to resolve the issue at hand upon the implementation of the 11th Malaysia Plan.

This has resulted in the steady decline in the share of documented foreign workers from 16.1% in 2013 to 12.0% of the labour force in 2017.

More can be done to build on the progress made, Bank Negara says, while proposing a five-pronged approach to managing foreign workers in Malaysia.

Firstly, it says, there must be a clear stance on the role of low-skilled foreign workers in Malaysia’s economic narrative. Secondly, policy implementation and changes must be gradual and clearly communicated to the industry.

Thirdly, existing demand-management tools (such as quotas, dependency ceilings and levies) can be reformed to be more market-driven, while incentivising the outcomes that are in line with Malaysia’s economic objectives.

Fourthly, there is room to ensure better treatment of foreign workers, be it improvements in working conditions or ensuring that foreign workers are paid as agreed. Lastly, it is also important to note that the proposed reforms must be complemented with effective monitoring and enforcement on the ground, particularly with respect to undocumented foreign workers.

An economist tells StarBizWeek that addressing the high reliance on foreign workers is pertinent for Malaysia’s transition into a high-income economy.

“Malaysia needs to shift its focus from importing cheap labour to managing labour flow that can maximise growth and facilitate its structural adjustment towards a higher income economy,” he says.

“It has been far too long for our economy to be swamped with foreign workers who are unskilled, or have low skill sets that could not contribute meaningfully to Malaysia’s aspiration of becoming a high-income economy,” he adds.

By Cecilia Kok, The Star

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Middle-income trap, brain drain and high public service spending among Malaysia’s risks

Cheah(pic) thinks the local stock market could go up by between 5% to 10% this year while the ringgit, which has mostly been on an uptrend in recent times, is “still down quite a lot”, against the US dollar.

 

 
Middle-income trap, brain drain and high public service spending among Malaysia’s risks

KUALA LUMPUR: A renowned global investor has called for structural reforms in Malaysia, saying that the country faces “very real” structural issues.

Penang-born Datuk Seri Cheah Cheng Hye (pic) who left Malaysia decades ago counts the middle-income trap, brain drain and high public service spending as current risks to the country.

Based in Hong Kong as the chairman and co-chief investment officer of fund and asset management group Value Partners Group for over two decades now, Cheah who helps manage over US$16bil in funds, however concedes that Malaysia remains a country with huge potential and opportunities.

“I don’t think we should underestimate the importance and attractiveness of Malaysia but what I am saying is that if we don’t want to be stuck forever (being) a so-called middle-income country, we need structural reforms,” he told StarBiz in a recent interview.

“Or maybe… we do want to be stuck because it is a comfortable position and because then, we can make a lot of compromises.”

“ (If that’s the case), we should be frank and say it, don’t pretend that we want to be an advanced country because that requires certain sacrifices.”

“The reality is that we are getting less and less competitive, we ranked number 23 in the latest Global Competitiveness report ,behind France and Australia which are developed countries. (Number 23) is not good enough for a developing country,” said Cheah, who recently made it to the top 40 richest Malaysians list.

Emphasising the issue of brain drain, Cheah, a former financial journalist and equities analyst said Malaysia could perhaps emulate India in this area where the concept of an Indian national overseas card has been introduced.

“I am told there are more than one million Malaysians overseas – (people like) entrepreneurs, these are exactly the type of people we want to stay here but they are not.

“We could introduce a new type of card called the Malaysian national overseas card for Malaysians who have chosen to leave the country and become citizens elsewhere.”

This card will give these Malaysian-born individuals no voting rights but will allow them to come back to work and invest here like everyone else, he said.

Cheah said this could help re-attract talent and there will be no political price to pay, because these people cannot vote here nor transfer this card to their children who would likely be foreigners.

“Some may actually come back, because it is not always greener on the other side… but you must make it easy enough (for them to come back).”

Cheah also pointed out that the amount Malaysia spends on public service is “very high” by any standards.

“Quoting from memory, about 30% of government spending is on civil service salaries and 16.5% of all employment in this country comprise civil servant jobs.

“No matter how you explain it, this is abnormally high ; something that I have learnt from my stay in Hong Kong is, keep the government as small as possible.”

He said although the civil service segment here appears to be bloated, it would be “unrealistic” to fire civil servants.

“Instead, maybe we can consider freezing and redeploying resources.

“Like any corporation, if you have too high a headcount, you freeze hiring and you redeploy people to where they are needed,” Cheah said.

Separately, Cheah, whose investments are mostly China-centric believes that Myanmar could be the next big thing.

“Nowadays, I like Myanmar because it is still cheap.

“It has about 55 million people but its gross domestic product (GDP) is only about US$65bil, Malaysia’s GDP is probably about US$320bil.

“Myanmar has enormous potential, at last they are emerging , gradually reconnecting with the world, they have (a lot of ) raw materials and are in a good position as one of the significant Belt and Road countries, China will go out of its way to invest there.”

Cheah said he would like to set up a Myanmar fund to invest in the country and is in the process of studying this possibility.

Among markets in Asia, Malaysia to Cheah, is “moderately attractive”.

He said consumer sentiment here was finally improving after it took a beating largely due to the implementation of the Goods and Services Tax (GST) back in 2015 plus there are some “interesting corporate restructuring taking place.”

Also, it is General Election year which going by history, tends to send the market higher, he said.

“I think there are good arguments why the Malaysian market is good this year but the arguments are not strong enough to result in a very strong market – and there’s also a global environment that’s not as good as last year.”

“I think the US administration is now focusing on globalisation and world trade and it seems to be moving in the direction of conflict with China over trade.

“If there is a China-US trade war, Malaysia will suffer collateral damage because we are a medium-sized player in a global supply chain, so it will be very disruptive,” Cheah said.

Upside for the Malaysian market could also be limited this year, he said, because its current valuation is relatively high at over 16 times price to earnings.

Cheah thinks the local stock market could go up by between 5% to 10% this year while the ringgit, which has mostly been on an uptrend in recent times, is “still down quite a lot”, against the US dollar.

The local unit appreciated by 8.6% against the dollar last year after losing some 4.5%, a year earlier.

At last look, it was traded at 3.9395 against the greenback.

By Yvonne Tan The Staronline
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Ma’sia’s skilled labour shortage, engineers not take up challenges, graduates can’t solve problems


More trained workers needed to attract new capital investments

Yap says manufacturers have to source for high-quality technology from places such as Taiwan and Europe to upgrade their production.

THE Malaysian economy can sure use a boost to grow sustainably in the long term because the indicators for long-term growth do not look very good.

That boost should come from a focus on human capital. To put it simply, a better proportion of skilled workers is needed for the economy to move up the value chain and be globally competitive.

This year the economy is expected to grow just over 4% year-on-year, after growing 5% last year and 6% in 2014. The economy is expected to grow by 4% to 5% next year although the headwinds buffeting the Malaysian economy will make it challenging to hit the upper band of the target.

Moving up the chain will mean producing goods and services that have a higher value, meaning that productivity will rise. The rise in productivity will mean that workers will get better wages. This is the basic argument of policymakers when they speak of how human capital can help the economy.

However, the reality is different. According to data from the Malaysian Productivity Corp, the average annual labour productivity growth between 2011 and 2015 was 1.8% while the 11MP has a target of 3.7% annual growth. The doubling in labour productivity growth is needed to hit the high-income target of the New Economic Model.

Malaysian Employers Federation executive director Datuk Shamsuddin Bardan notes that the economy saw a labour productivity growth of 3.3% last year but believes that it will be challenging for labour productivity to grow in the years to come because of the lack of skilled workers.

Shamsuddin: ‘I doubt very much whether our policy emphasising English will be successful, as statistics indicate that if we ask teachers themselves to take SPM English exam, possibly half of them will fail.’

The 11MP targets skilled workers, that is, those with diplomas and higher qualifications, to reach 35% or 5.35 million of total workforce by 2020. Currently 28% of the total workforce of 14.76 million are considered skilled workers.

Shamsuddin fears that without more skilled workers, the economy will find it more difficult to move up the value chain and will not be able to attract large capital investments.

He tells StarBizWeek that the 11MP target is well below the proportion for skilled workers compared to developed economies, where the proportion is at least half of the total workforce.

Shamsuddin says government plans to raise the skill levels of Malaysian workers have so far only shown mixed results, with a gap between the plans and the actual implementation.

Indeed, the Organisation for Economic Cooperation and Development, a grouping of rich economies, says in a 2013 report that the country needs to address long-standing economic weaknesses in the medium term in order to progress toward becoming an advanced economy within the next decade.

“Skill shortages and mismatches and the deficiencies in the education system that underlie them and the low participation of women in the workforce particularly need to be remedied,” it says.

It adds that the talent base of the workforce lags behind the standards of high-income nations. “The country suffers from a shortage of skilled workers, weak productivity growth stemming from a lack of creativity and innovation in the workforce, and an over-reliance on unskilled and low-wage migrant workers,” it adds.

Observers say cheap unskilled foreign labour is the bane of the Malaysian economy. According to the latest official estimates, there are 1.9 million documented foreign workers in the country with the Government having put a cap of the proportion of foreign workers to the total labour force at 15%.

Unofficial estimates of foreign workers, both legal and illegal, could be more than double that with the numbers having a negative effect on total wages.

Socio Economic Research Centre executive director Lee Heng Guie says in the long run, businesses will need to increase automation for the low-value processes in the manufacturing sector in order to reduce their reliance on foreign labour.

“We are not asking everything to be automated as some places you still need labour, but what you want is to gradually move up rather than continue to rely on cheap labour.

“It is not a solution for industries to compete,” he says. There is also a need to review policies in order to identify implementation flaws and weaknesses.

But the work cannot be all one-way. Lee points out that the private sector must come forward to work with the Government to create a sustainable ecosystem for innovation.

While businesses acknowledge the urgency of working efficiently and relying less on foreign workers, they point out that the supporting technology including for automation cannot be found in the country and must be sourced from abroad.

Asia Poly Industrial Sdn Bhd executive director Michael Yap says manufacturers have to source for high-quality technology from places such as Europe and Taiwan to upgrade their production processes. The company, a subsidiary of Bursa-listed Asia Poly Holdings Bhd, is a maker of cast acrylic sheets used to make corporate signages, lighting displays and sanitary ware, has a high proportion of foreign workers in its workforce.

Yap also finds it difficult to get skilled workers or even motivated ones compared to the 1980s and 1990s. He says engineers today are not willing to take up challenges and many graduates cannot solve problems.

His colleagues observe that Malaysians also do not want to work in the manufacturing sector, even if the workplace environment is conducive and they are given opportunities to give their inputs.

Given the increasing importance of the services sector to the economy, Englishlanguage skills are important but again, there is a gap between the plan and the implementation.

The Services Sector Blueprint launched last year targets the sector to make up 56.5% of gross domestic product by 2020.

Shamsuddin says it is critical for the education system to plan for the future requirements of the economy and the command of English is very important to the services sector.

“I doubt very much whether our policy emphasising English will be successful, as statistics indicate that if we ask teachers themselves to take SPM English exam, possibly half of them will fail,” he adds.

Lee feels that a more consistent policy towards English is important, referring to the abrupt change in the teaching of mathematics and science to Bahasa Malaysia after it was taught in English from 1996 to 2012, as a change that has failed Malaysian children.

By ZUNAIRA SAIEED Starbizweek

RelatedLiow: Malaysia needs more skilled workers

Reducing reliance on foreign workers

https://www.youtube-nocookie.com/embed/eBG7C3xitL4

More engagement needed with industry to avoid labour shortage in certain sectors

PETALING JAYA: The freeze on the hiring of foreign workers from February reveals how reliant Malaysia’s economy is on low-wage labour for growth.

A rough calculation by Malaysian Palm Oil Association chief executive Datuk Makhdzir Mardan showed that in 2013, when the plantation industry had a shortage of 23,500 workers, the opportunity cost came to RM1.6bil. He points out that in 2013, one foreign worker who works as a harvester equalled RM500,000 in productivity.

While the over-arching industrial policy is to produce higher value-added goods and services, the truth is that large segments of the economy is still very much dependent on low-wage labour, particularly of the low-skilled foreign migrant-worker kind.

Migrant workers Manik and Mohammad Delowar, both 27 years old from Bangladesh, are two such workers working on the multibillion ringgit Sungei Buloh-Kajang MRT line. Manik has lived in Malaysia for the last eight years and has worked on three property projects before being employed to work on the MRT project.

Both earn a salary of between RM1,500 and RM1,600 per month, 75% of which is remitted home to support their families. Manik told StarBiz that the freeze, which came about after a public outcry over an agreement between the governments of Bangladesh and Malaysia to supply low-skilled workers, would definitely affect the flow of workers that wanted to work in Malaysia.

“I do not wish to go back to my country as I’ll not be able to find a job there,” he said, adding that unemployment in Bangladesh was high and he had to support a family of six.

Manik paid RM8,000 to an agent and waited a year before securing a job in Malaysia. He sold land and borrowed money in order to pay for the fees. Mohammad, who has been working in Malaysia for eight months, paid RM12,000 in fees.

Their experience tell the often unheard human story of foreign workers in Malaysia. These millions of workers who come from the most part from Bangladesh, Indonesia, Myanmar, Nepal, the Philippines and Vietnam are familiar faces in various sectors of the economy. The construction and agriculture sectors cannot do without them while the services sector, especially the hospitality, food and beverage and security industries, have large numbers of foreign workers.

Although the low-cost model of growth has served Malaysia well in the 1980s and 1990s, it has also made local firms reluctant to adopt technology or more efficient ways of doing things. Malaysia’s membership of the Trans Pacific Partnership makes higher productivity and efficiency ever more urgent.

Economists argue that without a rise in productivity, measured in the production of higher value-added goods and services, wages will continue to be low. The large number of foreign workers with their lower skill sets and low wages makes things worse.

This is not to say that there are no higher value-added goods or services being produced, or that the Government is not encouraging it. The New Economic Model, together with the National Key Economic Areas, have identified various sectors and subsectors in which Malaysia can have a competitive advantage.

Leadership, clear-cut policy on foreign workers and investment in education as well as technology are just some of the issues that come into play as the country strives to reduce its reliance on low-wage workers and move up the value chain.

Master Builders Association Malaysia president Matthew Tee and Makhdzir agree that the adoption of technology and mechanisation will reduce dependence on foreign workers.

Tee said the Government should provide more incentives for construction firms to adopt more efficient processes such as the industrialised building system (IBS) that could reduce dependence on low-skilled migrant workers. He pointed out that reducing the import duties on construction machinery could also help.

Meanwhile, Makhdzir said more funds should be allocated to oil-palm research and development (R&D) to make the industry more competitive. “If we desperately need to make that progress, we need to put in more talent, and more money to make it competitive in terms of R&D,” he added.

Makhdzir said the policy needed to be more flexible where R&D was concerned as talent must be sourced from outside the country if necessary.

But in the meantime, the freeze on foreign workers is causing a lot of problems as news headlines in recent months show. The problem is particularly acute in the construction and agriculture sectors.

Tee said there was a shortage of 1.3 million workers in the construction sector and predicted a shortage of up to 2 million by 2020. “This will cause delay in projects which could result in liquidated damages by clients translating to thousands of ringgit per day,” he adds.

Tee observed that the government-initiated rehiring programme that in part would also legalise illegal foreign workers had only attracted 3% of the 1.7 million total number of illegal workers in the country. He said the requirements to legalise the workers were inflexible and because of that, many did not fit the requirements – one reason why the overwhelming majority had decided not to get properly documented.

He said firms wishing to hire workers under the rehiring programme found it more expensive than hiring fresh foreign workers. On the other hand, Makhzir said there needed to be leadership in tackling the issue while Tee said there needed to be more engagement with industry as the reaction from the authorities had been slow.
By ZUNAIRA SAIEED

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Malaysia no longer stuck in middle-income trap?


KUALA LUMPUR: Malaysia is no longer stuck in the middle-income trap, as its gross national income (GNI) is now progressively growing towards the high-income benchmark as defined by the World Bank, says Datuk Seri Idris Jala.

Attributing the positive development to the various reforms undertaken via the multi-year economic transformation programme (ETP), the CEO of Performance Management and Delivery Unit (Pemandu) points out that Malaysia’s GNI at US$10,570 (RM42,340) per capita last year is now only 15% away from the high-income-economy benchmark of US$12,475 per capita.

This compared with a gap of 33% between Malaysia’s GNI of US$8,280 per capita in 2010 and the then high-income economy threshold of US$12,276 per capita.

“As a result of the things we have been doing since 2010 and up to now, we have become completely unstuck (from the middle-income trap), with the gap (in Malaysia’s per capita GNI against the high-income threshold) now narrowed down to just 15%, compared with 33% in 2010,” Idris, who has been leading Pemandu, which is an agency under the Prime Minister’s Department, since 2010, said.

“The gap was even wider before 2010, and we could never close the gap for many years, resulting in many economists and financial experts proclaiming that Malaysia is stuck in the middle-income trap, and would not be able to become a high-income nation by 2020 unless we become unstuck,” he said in his keynote address on the Public Private Partnerships panel discussion here yesterday.

The panel discussion, jointly organised by research and publishing company The Business Year and education services provider Brickfields Asia College, was themed “Innovation as Driver for Local Economic Empowerment”.

According to Idris, Malaysia had managed to transform its economy, as a result of implementing innovative strategies. He said the Government remained confident of closing the GNI per capita gap and achieving the high-income target by 2020.

Under the ETP, the target was to achieve a GNI per capita of US$15,000 by 2020.

Meanwhile, in addition to GNI growth, Idris said Malaysia was also making good progress in the fiscal-sustainability space, as evident in the narrowing of the Government’s budget deficit and the continued manageability of its debt level.

The reduction of Malaysia’s fiscal deficit to 3.2% of gross domestic product (GDP) last year from 6.6% of GDP in 2009, for instance, was an indication of a stronger and more sustainable financial position. The country’s fiscal-deficit-to-GDP ratio was expected to reduce further to 3.1% by the end of 2016.

The Government debt-to-GDP level, on the other hand, would remain below the self-imposed limit of 55%. It stood at 53% last year.

“We have reduced subsides and implemented the goods and services tax (among the various economic reforms) to achieve fiscal sustainability,” Idris said.

“We have also put in a lot of effort to stimulate private investment growth” he added, noting that private investment growth had outpaced public investment since the launch of the ETP.

Idris said while there were still challenges in implementing economic reforms, Pemandu would continue to monitor closely the progress made by various government ministries.

“We are tracking all the investment projects one by one … we want to make sure that all these projects are being implemented just as we said they would,” Idris said.

On the moderate growth of the country’s economy and gradual pace of fiscal-deficit reduction, Idris said these were a result of deliberate policy to ensure that Malaysia did not grow at the expense of accumulating more debts, or had its budget deficit cut drastically at the expense of the country’s economic growth.

Through this balancing act, Idris said, Malaysia had managed to stay in the “safe zone” in terms of debt-to-GDP and fiscal deficit levels while maintaining a steady growth path. – Cecila Kok The Star

But in the same article, Danny Quah, professor of economics and international development at the London School of Economics, disagreed that Malaysia had moved past the middle-income trap.

Quah maintained his position on Saturday, at a panel discussion organised by Sunway University in Petaling Jaya.

He told the university’s students that Malaysia had been going after “low-hanging fruits” in policymaking, resulting in it being trapped in the middle-income status.

“We are now in a situation where we are in a good place, but we’ll not get past it to gain fully developed country status in Malaysia’s own mould,” he said.

Quah is of the view that Malaysia has become complacent about its achievements, and that the nation suffers from what economists call the “natural resource curse”.

The economist pointed out that only about one million out of the 30 million people in the country are paying income tax, noting that this small fiscal base would be unsustainable moving forward.

The problems are an unclear direction, lack of leadership commitment, high-level plans that are not practical, rigid implementation, a silo mentality and work approach, public demands and inputs not adequately obtained, poor accountability, and a lack of transparency and trust deficit.

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8 million more houses needed in Malaysia


Houses needed_alantongtoonPDF

MY attention was captured by a news entitled “The only place where housing is easily affordable” when reading The Times, a UK paper recently.

While I had expected some light on affordable housing solutions, I was surprised to find out that Copeland is the only area in England where house prices are less than three times the average annual salary of its residents.

According to the same article that quoted a research by UK Trade Union Congress (TUC), the number of “easily affordable” local authority areas across England has fallen from 72 to just one over the last 16 years. In prime areas, house prices reach as high as 32 times the average earnings of their residents.

Frances O’ Grady, the General Secretary of TUC which represents 6.2 million working people in the UK, called for an “ambitious programme” to bring the prices of homebuilding under control.

This resonates with the earlier comments made by the governor of the Bank of England (BoE) Mark Carney who said in May that the only long-term way to effectively bring down home prices is to build more homes.

In the UK, 63.8 million people lived in 26.4 million homes in 2012. This works out to about 2.4 persons per house.

There were calls for more homes even with such healthy ratio. Australia, which has a population of 21.5 million in 2013, has 9.1 million occupied houses or 2.4 persons per house.

At the recent World Class Sustainable Cities 2014 Conference, Kerry Doss from Brisbane City Council showed a slide presentation of persons per household over the past century.

As far back as 1927, Australia was already four persons per household. These made me reflect on the situation of our home country, especially since we too aspire to be a developed nation.

According to National Property Information Centre (NAPIC), we have a total of 4.7 million homes in the fourth quarter of 2013. As NAPIC does not track rural homes, we assume that only urbanites were taken into account in the survey.

This accounts for 70% of our 30 million population or 21 million people. Therefore, on average, there are 4.4 to 6.4 persons per household in our country.

This is a poorer ratio compared with Australia in 1927. This means we need to build four million to 7.8 million more houses to match the same ratio as the UK or Australia.

While we are aware that the Government aims to build one million affordable homes over a five-year timeline since last year, we still have quite a fair bit to catch up.

This is because we have only managed to build about 73,000 residential units per year for the last three years.

Under Budget 2015, it is encouraging to note that the Government plans to build 80,000 units under PR1MA and 63,000 units under another housing programme. This will bring the total planned units to 143,000. This figure is still way too low and the Government should consider building at least 200,000 units a year to meet the vision of one million affordable homes.

There should be a constant effort to track the progress of home-building. It is important to realise the goal of housing the nation by ensuring yearly targets are met.

Some of the measures that the Government can consider were recommended in my earlier articles.

They included freeing up state land for housing, purchasing agriculture land for development, building houses in rural areas and connecting them to the cities via public transports, as well as expediting the approval process to supply more houses to the market.

In addition to supplying more affordable homes to bring down prices of homes, there are also other factors to ensure that the rakyat have a roof over their heads.

In the same-mentioned article in The Times, Frances O’ Grady commented that, “Housing affordability isn’t just about house prices; decent wages are just as important.” I think it makes good sense and generates more food for thought for our nation.

By DATUK ALAN TONG

FIABCI Asia-Pacific regional secretariat chairman Datuk Alan Tong has over 50 years of experience in property development. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com


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Chang: ‘For the past few years, HBA has sounded the alarm on the risk of a homeless generation.’

WHEN middle income professionals are unable to afford their own home based on a single income and have to team up with either a spouse or another person to qualify for a mortgage loan, then it is a sign that the unaffordability of our housing market has become critical.

A finding by US-based urban development researcher Demographia reveals Malaysia’s residential housing market is “severely unaffordable”, even more out of reach than residents in Singapore, Japan and the United States.

Demographia’s finding, cited by Singapore’s Straits Times in a report on Oct 14, rates housing as severely unffordable if the median of house price to annual income is 5.1 times.

Malaysia clocked in at 5.5 times, showing many Malaysians continue to be locked out of the housing market, compared with Singapore’s 5.1 times, while the United States’ and Japan’s housing markets were found to be “moderately unaffordable”.

Public interest group, National House Buyers Association (HBA) honorary secretary-general Chang Kim Loong says Demographia’s report supports HBA’s own finding that house prices, especially in the urban and sub-urban areas, have risen beyond the reach of many average Malaysians.

“For the past few years, HBA has sounded the alarm on the risk of a “homeless generation” made up of a growing number of young Malaysians especially the lower and middle income groups who are unable to afford their own home. When this homeless group grows in number, it can give rise to many other social problems,” he warns.

Siva_house unafforable

Siva: ‘The fact that salaries have not kept up with the upswing in property prices have further worsened … the situation.’

Chang says when even middle income professionals are unable to afford their own home based on a single income, the situation has become critical.

He says unless one is willing to be tied down by a long-term or back-breaking mortgage or mortgages, the high residential prices have rendered buying a house an increasingly uphill task, if not an impossible feat for the many lower income and average Malaysians.

“The skyrocketed prices have driven house buyers to take back breaking mortgages and many needed to combine their income in order to qualify for a mortgage, thus leaving them with very little or no savings after paying the monthly instalments and other basic necessities.

“This will place families at risk as they could fall into a deficit situation if any sudden emergencies happen to either of the borrowers,” Chang says.

He points out the possibility that in the event these borrowers cannot afford to pay their instalments and the banks are forced to auction off their properties, “there is a risk of a property bubble bursting, just like what happened during the sub-prime financial crisis in the US.”

“The borrowers and their dependents will also be faced with financial and emotional crisis that befalls their foreclosed property. Foreclosures can devastate a family’s economic and social standing, leaving them poorer instead,” Chang laments.

Chang says just six years ago it was still possible for a single middle level manager earning RM5,000 a month to buy a new double-storey link house in Kajang for less than RM250,000, and for a single executive earning RM3,000 a month to buy a new condominium in the Old Klang Road area for about RM200,000.

“Today, a new house in Kajang are in excess of RM700,000 but a middle level manager is just earning RM6,000 or thereabout a month. Recent launches of condominiums around Old Klang Road area are in excess of RM600,000, while the average salaries of executives are still around RM3,500 a month,” he laments.

He believes the maximum price that households with an monthly income of RM10,000 should purchase is only RM360,000 (RM120,000 x 3x).

“HBA has always stressed that affordable housing should be priced around RM150,000 to RM300,000, and not more then RM400,000 even for prime locations. Given that annual household income uses the assumption of two working spouses, there is a critical need for properties priced at RM150,000 to cater to single families and adults.

“We urge the government to further lower the threshold of affordable house price to between RM150,000 and RM300,000, and not more than RM400,00 even for prime locations,” Chang adds.

Chang says these houses, with minimum built-up of 800 sq ft and three bedrooms, need not come with fanciful finishing, but have just the bare necessities for a family’s comfort.

Stemming the greed

Malaysian Institute of Estate Agents (MIEA) president Siva Shanker concurs that the unaffordability housing issue has become critical over the past three to four years due to the sharp upswing in house prices.

“It was driven by the low entry costs with schemes such as no need for downpayment, developer interest bearing schemes and free stamp duty and legal fees, Although the Government has introduced various cooling measures and more responsible bank lending guidelines which has brought down the number of housing transactions, prices or value of houses still remain high.

“The fact that salaries have not kept up with the upswing in property prices have further worsened the unaffordability situation,” Siva explains.

HBA’s Chang points out the risks posed by “Investors’ Clubs” or “Millionaires Clubs” which are basically syndicated speculators incorporated by some ingenious individuals.

“They work in cahoot with developers, valuers and banks. Speculative buyers may be caught by the latest round of cooling measures. How the situation will pan out will depend on the holding capability of these speculators of which most of them may not have. Come hand-over time when it is time for these “investors” to flip their purchases, there may be a shortage of buyers for these properties, most of which were transacted at inflated and not real market value prices,” he warns.

Siva opines that the imposition of real property gains tax (RPGT) to tax gains from property transactions should be counted from the date of completion of the property and not from the signing of the sale and purchase agreement as what is being practised now.

This is given that it takes three years for high-rise residences to be delivered to buyers upon the signing of the sale and purchase agreement, and two years for landed property. Chang says the severity of the housing crisis for many Malaysians today calls for a workable housing delivery model to be put into action urgently before the problem spills over and cause more social problems in the country.

Housing the people has to be made the top thrust of the government and all possible measures need to be put to work fast and bottlenecks must be promptly addressed.

He says much more can be done to ensure a sustainable and orderly housing market for the people, stressing that holistic and concerted efforts need to be adopted.

“However, very often policies adopted are more for political expediency rather than for the betterment of the people.

“We need a single umbrella to monitor, regulate and police the performance of the various agencies that are entrusted with the role to ensure affordable housing index are met and properly distributed to the deserving ones. They must build the right quantity of the right property, at the right location, for the right populace, and at the right price.

“There must be full transparency on the location, number of units, registration and balloting process to ensure fairness to all eligible buyers,” Chang stresses.

A single database will enable individuals to learn about the availability of the affordable housing in their communities or in the communities they planned to move to, and understand financing options avail to them.

Siva also calls for a central planning and delivery agency to plan and coordinate all the affordable housing needs of the people.

“The whole process should be totally transparent with a master registry to record all the database of applicants and successful candidates. There should also be a moratorium period of up to 10 years to ensure that the successful candidates offered these affordable housing will not be able to dispose these homes for quick profit.

“The federal and state governments should provide the land and other forms of incentives to encourage private developers to lend their support for these affordable housing schemes,” Siva says.

Chang agrees that giving incentives to developers that build affordable housing will motivate them to throw in their support to build more of such housing units, adding that building up the infrastructure connectivity to the still relatively undeveloped areas will make these places more accessible and improve demand for property in those places.

“HBA has proposed to the government to take the lead by unlocking more of its vast land banks to build affordable housing for the people.

“The reason why developers are not chipping in to build more affordable housing units is because of the so-called profit maximisation by industry players. It is either high-rise multiple hundred units or high-end luxury units. Very often it is a combination of both – luxurious high-end units.I have not heard of developers building single-storey terrace houses that were so prevalent in the past. Developers are refusing to build such price and low margin items and will rather focus on higher margin items. With land being a scarce resource, developers will maximise the value of their land banks.

“If the land comes from the federal and state governments, private developers will be more willing to throw in their support to develop affordable housing for those in need,” Chang concludes.

Source: ANGIE NG The Star/Asia News Network

Related post: 

Malaysian homes more unaffordable than Singapore, Japan and US; Budget 2015 brings little joy

Malaysian homes more unaffordable than Singapore, Japan and the US; Budget 2015 brings little joy


Home affordability_ Dem

File picture shows houses under construction in Kuala Lumpur. Malaysia has a ‘severely unaffordable’ residential homes market, according to researcher Demographia.— AFP

KUALA LUMPUR, Oct 13 — Malaysia has a “severely unaffordable” residential homes market, with housing even more out of reach for its residents than in Singapore, Japan and the United States, according to US-based urban development researcher Demographia.

Demographia’s report was cited today in a report in Singapore’s Straits Times newspaper to highlight how many Malaysians continue to be locked out of the residential housing market despite the federal government’s attempt at helping first-time house buyers.

According to the ST report, Demographia rates housing as severely unaffordable if it is 5.1 times median annual income. Malaysia clocks in at 5.5x, higher than Singapore’s 5.1x, while housing in the United States and Japan is “moderately unaffordable”.

Government data cited by the ST report shows that since 2012 median monthly household income has risen eight per cent annually to RM4,258, slower than the average housing price increase of 10 per cent to RM280,886.

The country’s consumer price index has risen by an average of 3.3 per cent this year and Putrajaya had warned it may spike by 5 per cent next year, tripling the 2013 average.

In presenting Budget 2015 last Friday, Prime Minister Datuk Seri Najib Razak introduced a Youth Housing Scheme that will waive down-payments and subsidise ownership by up to RM10,000 for 20,000 married couples under 40.

Najib also said the government would provide another 80,000 new homes priced at RM100,000 to RM400,000 under the 1Malaysia People’s Housing Programme (PR1MA).

Both schemes, including the existing My First Home (MFH) scheme are only for households with a combined monthly income of less than RM10,000.

According to Bank Negara only a third of My First Home applicants received loans in the first year, as banks refused to take risks.

And PR1MA has seen just 761 buyers for the 160,000 units launched since 2013.

“We earn just over that but it’s not enough for savings. We can convert rent into loan repayments but we can’t pay the 10 per cent deposit,” lawyer Puteri Mohamad told the Straits Times in commenting on the Budget proposal to help households earning less than RM10,000 monthly to buy homes.

Office administrator Mimie Azriene Mohd Zin, 32, has no children but she and her technician husband have applied for a PR1MA home.

But she told the Straits Times they have not figured out how to afford the down payment on their combined income of under RM4,000 a month that leaves them with little savings living in expensive Kuala Lumpur.

“We might not even be able to afford the repayment but we have to try before prices go up further,” she told the daily.

Source:  http://www.themalaymailonline.com/

Malaysia’s budget aid brings little joy to house hunters

Despite being a partner in a law firm just outside Kuala Lumpur, Ms. Puteri Mohamad, and her fiance, can only watch as apartments in the area where she lives spiral above 500,000 ringgit (US$153,334).

When the government proposed measures in its 2015 Budget — released on Friday — to help households earning less than 10,000 ringgit (US$3,067) monthly to buy homes, she was not at all elated.

“We earn just over that but it’s not enough for savings. We can convert rent into loan repayments but we can’t pay the 10 percent deposit,” said Puteri, 33, who lives in a rented flat in Petaling Jaya.

Many Malaysians like her find themselves locked out by a combination of what U.S.-based urban development researcher Demographia rates as a “severely unaffordable” residential market and accelerating inflation.

Malaysia’s consumer price index — which includes many subsidized goods — has risen by an average of 3.3 percent so far this year and the government warns it may spike by 5 percent next year, nearly triple the 2013 average.

Government data shows that since 2012 median monthly household income has risen 8 percent annually to 4,258 ringgit, slower than the average housing price increase of 10 percent to 280,886 ringgit.

Demographia rates housing as severely unaffordable if it is 5.1 times median annual income.

Malaysia clocks in at 5.5x, higher than Singapore’s 5.1x, while housing in the United States and Japan is “moderately unaffordable.”

Prime minister Najib Razak said in his budget speech the government would provide another 80,000 affordable homes (priced at 100,000 ringgit to 400,000 ringgit) under the 1Malaysia People’s Housing Programme (PR1MA) and introduce the Youth Housing Scheme that will waive downpayments and subsidize ownership by up to 10,000 ringgit for 20,000 married couples under the age of 40.

Both schemes, as well as the existing downpayment waiver under the My First Home scheme, are only for households with a combined monthly income of less than 10,000 ringgit.

The National Housebuyers Association lauded the moves to help aspiring homeowners in financing but criticized the lack of new measures to cool rising prices that are the root of the problem.

Its secretary-general, Chang Kim Loong, said speculators have taken advantage of the low entry cost of buying a property at the expense of genuine buyers.

Office administrator Mimie Azriene Mohd Zin, 32, has no children but she and her technician husband have been unable to even think of home ownership until these schemes came along.

They applied for a PR1MA home, which the government says is priced 20 percent lower than comparable units, worth about 200,000 ringgit three months ago.

But they have not figured out how to afford the downpayment on their combined income of under 4,000 ringgit a month that leaves them with little savings living in expensive Kuala Lumpur.

“We might not even be able to afford the repayment but we have to try before prices go up further,” she said.

That is, if she can get a loan in the first place. The central bank reported that only a third of My First Home applicants in the first year received loans as banks refused to take the risk.

Tellingly, even PR1MA saw just 761 buyers for the 160,000 units launched since 2013.

BY By Shannon Teoh, The Straits Times/Asia News Network

Related:

Annual DhiDemographia International Housing Affordability Affordability Survey: 2014

PDF]10th Annual D hi Demographia International Housing

Click to access dhi.pdf

MIEA disappointed with Budget 2015

The Malaysian Institute of Estate Agents (MIEA) believes that
the measures unveiled in Budget 2015 were too small to have an effect on
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Malaysia’s flight MH370 mistakes reflect stagnant politics; Bad apples in NZ sex crime..


Malaysia is poised to escape the middle-income trap, but also ready to fall back into it.

Normally the middle-income trap refers to countries with per capita GDP ranging from $1,000 to $12,000. GDP per capita in Malaysia already reached $1,000 by 1977, and $11,000 by 2013. After ups and downs over almost four decades, it seems Malaysia could walk out of the middle-income trap very soon.

Nonetheless, according to the Asian Development Bank that created the concept, GDP per capita is only a superficial indicator. The more accurate definition of the middle-income trap is that when a country enters the ranks of middle-income countries, a series of problems emerge, including rising labor costs, a lack of technological innovation, and subsequent economic stagnation.

There are two aspects of the definition: rising productivity and good governance. The essence of governance here means encouraging reasonable competition to maximize the value of talent and give boost to innovation.

MH370 mistakesMalaysia’s poor response following the disappearance of flight MH370 reflected the fact that the country is still way behind in terms of governance. Behind the chaotic information are the flaws in Malaysia’s system of governance.

There are both systematic and cultural reasons behind Malaysia’s poor governance. But it is more related to the lack of secularization.

One driving force in the rise of Malaysia’s GDP per capita has been the export of abundant raw products such as oil and rubber.

Malaysia is a multi-ethnic country, with Malays making up 68 percent of the population, Chinese 24.6 percent, and Indians 7 percent. According to the law, Chinese Malaysians, who were historically dominant in the economy despite their smaller numbers, cannot take positions as top leaders; and Malays must make up two-thirds of ministers and parliamentary members, and three-fourths of civil servants.

Malays also enjoy special policies in other fields such as college admission and civil servant recruitment. Malays even enjoy a higher quota in the issuing of taxi operation licenses.

Some Malays simply acquire the licenses and rent them to Chinese, collecting unearned income.

This rigid system which shows special care for Malays, to a certain extent, helps different ethnic groups to stay in their own places and thus boosts social stability. But this also closes the channel for upward mobility because it fails to provide a reasonable platform for competition.

The special privileges enjoyed by Malays give leeway for corruption. And in terms of governance, these privileges translate into a conservative group with vested interests and a lack of talent.

The modernization of Malaysia’s governance is also related to Islamic modernization.

In 2001, then prime minister Mahathir Mohamad announced that Malaysia was a Muslim country. Current Prime Minister Najib Razak also declared in 2007 that Malaysia has never been a secular country.

Even today, some states in Malaysia still maintain elements of Sharia law. Different religious populations have different civil laws, even when living in the same place.

Islam is not a negative element. However, integrating religion with the law and politics rather than separating them may cause social conservatism and isolation.

In fact, this is a misinterpretation that sees Malaysian politics as strictly controlled by the elite. What’s dysfunctional is not elite politics itself, but a rigid, dull system that is responsible for selecting the political elite.

Malaysia is determined to enter the ranks of developed countries by 2020. But judging from its handling of the MH370 incident, Malaysia’s modernization will take far longer than this.

Source: By Ding Gang Source:Global Times Published: 2014-3-19

Bad apples -Malaysian envoy in NZ sex crime 

NZ Sex crime_Muhammad Rizalman

 

Malaysian envoy in NZ sex crime named

A photo of the Malaysian High Commission in Wellington, New Zealand. 
KUALA LUMPUR: The Malaysian diplomat who is at the centre of an alleged sexual assault case in New Zealand has been identified as Muhammad Rizalman Ismail.His identity was allowed to be revealed after media organisations challenged a judge’s decision to grant permanent name suppression, The New Zealand Herald reported today.

The identity of Muhammad Rizalman, 38, who worked at the Malaysian High Commission in Wellington, was previously concealed due to a immunity order imposed by a Wellington District Court judge on May 30.

However, the High Court at Wellington today held an emergency hearing to overturn the immunityruling and it was successful.

Meanwhile, the Malaysian Foreign Affairs Ministry said it will not waive Muhammad Rizalman’s diplomatic immunity just yet. But they are prepared to do so, if necessary, so that the suspect can be prosecuted under the New Zealand law, its Minister Datuk Seri Anifah Aman said.

He said the Malaysian government is committed in ensuring the transparency of the investigation of this case.

“If it is absolutely necessary that we think it is best to (waive his immunity) we will do it without hesitation,” he told a press conference in Wisma Putra here today.

NZ Sex crime_Muhammad Rizalman1
Anifah also said, the Malaysian government has confidence with the Defence Ministry’s (Mindef) board of inquiry (BOI) that they will communicate with the New Zealand authorities, adding that they will not hesitate to take stern action against the suspect.”Mindef will not hesitate to act under the Armed Forces Act 1972, if it is proven beyond doubt that Muhammad Rizalman is responsible and guilty of the offense as charged,” he said.

He said the waiver would be deemed necessary when New Zealand requested for Muhammad Rizalman’s return, out of belief that the investigations in Malaysia were not done properly.

However, he informed that it was the New Zealand authorities who had allowed the man to be brought back to Malaysia in May.

Besides that, Muhammad Rizalman has also undergone medical checks at the Mindef Medical Centre on May 29 which include physical and mental tests.

Anifah said blood and urine tests were also conducted and the results were satisfactory. Muhammad Rizalman is now at the Tuanku Mizan Military Hospital to have his mental and emotional health assessed.

On the Malaysian High Commission’s website in New Zealand, Muhammad Rizalman, who had previously claimed diplomatic immunity, is listed to be Defence staff assistant, with the rank of a warrant officer II.

The man was arrested after he allegedly followed a 21-year-old woman to her house on May 9 and attacked her.

Sources: Astro/The Star/Asia News Network

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