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To understand the frustration and issues of engagement within knowledge employees one only needs to understand the role of management in industrial and knowledge organisations. This article hopes to clarify the issue.
The task of managing an organisation ultimately comes down to managing the 2C’s – that is how do we get people to cooperate and how to coordinate work. Cooperation enables information to flow whereas coordination enables physical materials to flow, both of which are required at the right time in the right place for outputs to be generated.
In industrial organisations, the “2C” challenges are largely managed through “work flow design.” Industrial workers are presented a way of working in which they have to conform to the work flow. The industrial worker’s discretion is limited and often limited to only his work area. Inputs come in, he makes a “go/no go” decision on transforming that input into an output which then moves on to the next process. The industrial world has done a fantastic job of achieving consistent standards of quality across outputs with six sigma precision while at the same time keeping industrial workers motivated as seen in the Toyota Production System.
Whereas for the knowledge organisation, the knowledge of the worker is a prime contributor to into the production process. It is with knowledge that inputs are created, transformed and shaped in outputs which customers pay for (think software code or hotel concierge). The 2C challenge is significantly higher in knowledge work as compared to industrial work. Evidence of this is the amount of time knowledge workers spend in meetings as compared to industrial workers. Closely examined, much of meeting time is spent trying to overcome cooperation and coordination problems as meeting minutes are often records of who is going to do what by when.
Borrowing from the success of industrial organisations in overcoming the 2C challenge, many knowledge organisations have borrowed techniques from it. Examples are the use of KPI – key performance indicators. In industrial work, KPI’s are measures of process reliability while in knowledge work its been used to measure human performance. The bell curve which was a key tool in statistical process control to measure consistency in production was brought over to measure employee performance. Unfortunately, humans cannot be managed in the same as industrial processes are. Humans are guided by emotions and how humans feel about their work and work environment has a direct impact on their “discretionary effort.” (See the previous article on this here)
To succeed, knowledge organisation will need new ways of managing and a big part of will require devolving control away from management to the employees. Learning how to be in control without being in control will be a new skill. The task of management will be to create the conditions in which cooperation and coordination can flourish without supervision. A great example of this is the work Ricardo Semler, CEO of Semler Partners has done in his “brick & mortar” companies – see here and his TED TALK here.
Some thoughts as we watch a world going crazy:
“No drug, not even alcohol, causes the fundamental ills of society. If we’re looking for the source of our troubles, we shouldn’t test people for drugs, we should test them for stupidity, ignorance, greed and love of power.” – P J O’Rourke
– See more at: http://m.thesundaily.my/news/854486#sthash.u1tOoHn7.dpuf
Monday October 29, 2012 (Click here for the original article in the Star)
Growth not just a question of finance, say experts
By HUGH DENT
PARIS: Finance drives growth, but too much of a good thing sucks the lifeblood, brains and brilliant ideas from an economy, according to “startling” findings at the Bank for International Settlements.
And advanced economies are overweight and even obese with financial services.
“Finance, literally bids rocket scientists away from the satellite industry,” BIS economists warned, saying that it competes for people with high qualifications as well as for buildings and equipment.
“The result is that people who might have become scientists, who in another age dreamt of curing cancer or flying to Mars, today dream of becoming hedge fund managers.”
So argue BIS economists Stephen Cecchetti and Enisse Kharroubi who offer deep insights into one aspect of the financial and debt crisis which has hit rich countries in the last four years.
Referring to the dotCom boom of the 1990s and countless other boom-and-bust experiences, they said: “Booming industries draw in resources at a phenomenal rate.
“It is only when they crash, after the bust, that we realise the extent of the overinvestment that occurred.”
Beginning with the premise of economic theory that “finance is good for growth“, they noted that this had been one driver of financial deregulation.
The argument was that “if finance is good for growth, shouldn’t we be working to eliminate barriers to further financial development?“
The economists then set themselves a question: Is this true regardless of the size and growth of the financial sector?
“Or, like a person who eats too much, does a bloated financial system become a drag on the rest of the economy?“
For an answer they said: “We present two very striking conclusions.”
First, “with finance you can have too much of a good thing,” they said. “At low levels, an increase in the size of the financial sector accelerates growth of productivity.”
But “there comes a point – one that many advanced economies passed long ago – where more banking and more credit are associated with lower growth.”
Their analysis showed that when private credit grew to a point greater than gross domestic product, “it becomes a drag on productivity growth“.
Also, when the financial sector accounted for more than 3.5% of total employment, further development of finance tended to damage economic growth.
Extreme’ examples of Ireland, Spain
The two economists, writing in a personal capacity, have even come up with a cut-off or turning point at which the size of the financial sector does more harm than good: when the number of people in finance exceeds 3.9% of all people in employment.
Examples of countries beyond this “growth-maximising point” are Canada (with 5.5%), Switzerland (5.1%), Ireland (4.6%) and “to a lesser extent” the United States (4.2% ).
However the economists, whose work was distributed recently by the BIS as a matter of “topical interest,” warn that the negative effect on growth may hit the economy sooner. Their table put this lower turning point at about 1.3% of total employment.
In that case “all countries in our sample are considerably above” the lower band for the turning point.
The sample used for analysis at the BIS, the so-called central bankers’ central bank, comprises 21 countries: Australia, Austria, Belgium, Britain, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, South Korea, Spain, Sweden, Switzerland, and the United States.
The calculations showed, for example, that if the number of people in finance in Canada were to fall back to the turning point, gross domestic product per worker would rise by 1.3 percentage points. For Switzerland the gain would be 0.7 percentage points and for Ireland 0.2 percentage points.
“The case of Ireland is interesting because over the period 1995-99, the Irish financial sector’s share in total employment was 3.84% 0- very close to the growth-maximising value.
“But over the next 10 years, the share rose to more than 5%.”
If the share had been constant at 3.84% , the growth of output per worker could have been up to 0.4 percentage points higher over the last 10 years.
The economists came up with a second “quite striking” discovery: “The faster the financial sector grows, the slower the economy as a whole grows.”
To demonstrate their findings, they gave the examples of the “extreme cases” Ireland and Spain.
“During the five years beginning in 2005, Irish and Spanish financial sector employment grew at an average rate of 4.1% and 1.4% per year, while output per worker fell by 2.7% and 1.4% , respectively.
“Our estimates imply that if financial sector employment had been constant in these two countries, it would have shaved 1.4 percentage points from the decline in Ireland and 0.6 percentage points in Spain.
“In other words, by our reckoning financial sector growth accounts for one third of the decline in Irish output per worker and 40% of the drop in Spanish output per worker.”
They said: “Overall the lesson isthat big and fast-growing financial sectors can be very costly for the rest of the economy.”
The report was written against a background of some evidence that finance has lost its shine for people going to university, and for those emerging as graduates, in advanced economies.
At the height of the pre-crises boom in financial services, the sector was sucking in many people with high skills in mathematics and financial engineering, known as “quants“, for astronomical salaries. AFP
Whistleblowing: A Shariah Imperative (reproduced from the Malaysian Insider)
Maszlee Malik, PhD (Durham), International Islamic University Malaysia (IIUM)
Musa Mohd Nordin, FRCP (Edinburgh), Muslim Professionals Forum (MPF)
In todays enlightened age of democracy, it is rather unfortunate that when the term ‘Islamic political thought’ is raised, one is often confronted with two polarized and contradicting points of view. The Muslim apologists will unreservedly disconnect any form of relationship between Islam and politics, which they consider as part of the secular public sphere. Islam is perceived as a mere set of theological arguments and rituals akin to other beliefs and must be distanced from worldly politics. On the other extreme, there exist a Muslim body politic, obsessed with the traditional and conservative interpretation of the holy texts, and relentlessly confining the notion of Islamic politics within the limited boundary of hudud, wilayatul faqih(rules of the clerics) or the re-establishment of the global Islamic caliphate (Khalifah).
Many have failed to understand, Muslims included, the ethical and moral dimensions of the term ‘Islamic politics’ from the holistic and all encompassing concept of Maqasid al-Shariah or the highest objectives of Shariah. As the true and authentic compass of the entire corpus of Islamic legal prescriptions, the Maqasid al-Shariah defines the cardinal purposes of the Muslim’s individual, societal, national and global life experiences. It is these higher objectives of Shariah that dictates the Muslims participation in civil society or political governance in their mutual quest for mercy and justice for all mankind.
Al-Ghazali (d 505 AH) pioneered the development of the concept maqasid al-Shariah. It was a major breakthrough, remapping our religious imperatives and threw a whole lot of new challenges for legal scholars. There was unfortunately a lull, a void that was later to be addressed by the brilliance of the Andalusian scholar in the 8th century of Hijrah. Imam Abu Ishaq al Shatibi al Andalusi (d 790 AH) crystallized the ideas of Ghazali and discussed this in a very lucid and “scientific” manner in his magnum opus Muwafaqaat fi Usuul al Shariat.
Deeply rooted in the Islamic ontological-based epistemology of tawhid (oneness of God), maqasid al-Shariah lays down the foundation of Islamic polity encompassing all the meanings and objectives of the spirit of Shariah in attaining success (falah) in the worldly life. The success of this human project is reflected in the well-being of human society which is nurtured and protected by the comprehensive preservation of the five essentials in human life: faith, life (nafs), intellect (‘aql), progeny (nasl) and wealth (mal)’ (see: Quran, 2:189; 3:130; 3:200; 5:35; 5:100; 24:31; 28:67; 24:51). Thus, it implies that the principles of Islamic politics must lead to ‘human well-being’.
Political activities and processes from the Islamic point of view must therefore consist of maqasidic elements to fulfill the maqasidic endpoints. It embraces a virtue-based consequentialistic paradigm, as its supreme purpose and overriding objective is the pursuit of ‘adl wa ihsan’, justice and goodness towards the attainment of maslahah, (public interest and benefits) for and between individuals, communities and nations both in this world and the hereafter.
Embodied in the Maqasid al-Shariah, are a few cardinal principles in relation to the Islamic political framework. These include the concept of ‘Adl wa Ihsan (justice with fairness and mercy); Amanah (trust and responsibility); Shura (mutual consultation) and Islah (continuous transformation towards the society’s well being). These maqasadic concepts and principles empower the Muslim individuals to be responsible and functioning players in the political process. Put it another way, all Muslims are inherently vanguards of the Islamic polity. Thisindividual empowerment has been promoted in Islam through al-Qur´an, the Prophet’s traditions and the administrations of the four rightly-guided Caliphs.
Shari’ah Empowers Individuals Politically
Muslims as individuals and citizens in the community are empowered to have their say and to determine their own destiny and not be dictated or bridled by the elites under the yoke of ‘state’ or ‘authority’. These ideals also reflect the concept of empowered civil society centered on the concept of responsible citizen and can be clearly articulated within the healthy environment of democracy as frequently asserted by the prominent Sudanese thinker, Hassan al-Turabi in many of his writings.
Essentially, every single individual in the Islamic community is empowered to preserve justice and peace for the public interest according to these principles, which are the main objectives ofShariah. Al-Qur’an emphasizes the need for this mechanism in various verses (see: al-Qur’an: 3: 110; 9:71; 22:41; 4:114; 5:2; 7:165; 5:78-79). Similarly, many authentic Prophetic traditions have underpinned the major role of individuals in enhancing universal justice within a community. The four rightly-guided Caliphs have received numerous unsolicited advice, complaints, oppositions and also rejections of their policies from their citizenry. This socio-political ambience reflects the political maturity of the empowered citizens and their rulers during this enlightened period.
In the same way, islah as a landmark theme in the individual’s lives will transform them into self-actualised people striving to achieve ihsan (excellence) in their daily life in their pursuit offalah (salvation). These righteous concepts thus take centre stage in the society and consequently determine the consistency of justice, benevolence, religiosity, good governance and the development of the ummah (Muslim nation). As an imperative, this concept allows for vertical accountability of peer assessment to be implemented within the larger governance process to ensure the trust is delivered effectively. At the same time, both top-down, and bottom-up evaluations as part of islah at all levels of governance and community life will enable accountability to be exercised comprehensively.
Through the spirit of amr ma’ruf nahy munkar (enjoin the righteous and forbid the evil) the intrinsic meaning of islah is articulated to guide Muslims in their continuous striving to attain ‘falah’ in both worlds. Amr ma’ruf nahy munkar as an important imperative of Shariah also contributes towards the evolution of functioning and responsible individuals who live with the awareness of their responsibility to enjoin and promote virtue and at the same time o eradicate indecency and evil in their community. Evil is not only perceived as the sinful acts of individuals, but includes all acts of corruption, bribery, dictatorship, violation of rights, discrimination, misuse of power, and non-performance of leaders and administrators which would lead to the destruction of the community. It is only through collectively practicing the obligation of amr ma’ruf nahy munkar, that the society will progress, achieving unprecedented heights in development, hence ‘good governance’.
Any effort to eradicate evil in community life reflects the true meaning of faith and religiosity as it proliferates the exercise of justice, and epitomizes the wider implication of jihad according to the Qur’anic verse (9: 111-112). The effective implementation of amr ma’ruf nahy munkar also stipulates the importance and the active participation of individuals as citizens in governance activities.
This injunction is illustrated in the Quranic verse: “Let there arise out of you a group of people inviting to all that is good (Islam), enjoining al-Maaruf (righteousness) and forbidding al-Munkar (evil and forbidden) and it is they who are successful” (Al Imran (3): 104)
In the chapter al-Hud: verse 116 it was mentioned that: “If only there had been among the generations before you persons having wisdom, prohibiting others from fasad (crimes and sins) in the earth, except a few of those whom We save from among them! Those who did wrong pursued the enjoyment of good things of (this worldly life) and were Mujrimun (criminals).”
In a tradition narrated by Muslim, Prophet Muhammad (pbuh-peace be upon him) was reported as saying: “Those who witness evil must correct it firstly with his hand, failing which, with his mouth (verbally), failing which, with his heart and that is the lowest of Iman.” (Narrated by Muslim)
It was also narrated that the Prophet said, “The master of all martyrs is Hamzah bin Abd-al-Muttalib [Prophet’s uncle] and any man who was killed because he stood up to an unjust Imam [leader] and enjoined for what is right and forbade what is wrong.” (Narrated by al-Hakim)
In another occasion, the Prophet said, “The best word is the word uttered by a person before a tyrant to stop him from his evil doings”. (Narrated by Abu Dawud)
Whistleblowing in the context of Shari’ah
In embracing the spirit of these pivotal principles; the act of whistleblowing as a manifest of islah and amr ma’ruf nahy munkar has been part of the Shariah imperatives, and a vital constituent of the Islamic political culture since the days of Prophet Muhammad (pbuh).
There were numerous incidents during the lifetime of the Prophet (pbuh) which sanctioned the practise of whistleblowing. Amongst them is a Prophetic tradition as reported by one of his companions, Jabir bin Abdullah who heard the Prophet (pbuh) said: “Discussions are confidential (not subject to disclosure) except in three places: “Shedding unlawful blood, unlawful cohabitation and unlawful accumulation of wealth“. (Narrated by Abu Dawud)
In another Hadith, Zaid bin Khalid reported that the Prophet (pbuh) said: “Shall I not tell you who is the best of witnesses? The one who brings his testimony before being asked to do so, or tells his testimony before he is asked for it.” (Narrated by Malik).
It is evident from this tradition, that the Prophet (pbuh) was encouraging his ummah to blow the whistle voluntarily, as a moral obligation towards the maslahah, (public interest and benefits of the larger society). If we look at it from the angle of Amru bil Maaruf, (enjoining goodness) Wal Nahy an Al Munkar (and forbidding wrongdoing) or from the perspective of Shahada(witness attestation), which is mandatory upon Muslims, then whistleblowing is a “duty” because the purpose of whistleblowing is the same as that of ‘enjoining goodness and forbidding wrongdoing’.
The civil and political administration of the Prophet Muhammad (pbuh), as leader of the city state of Madinah, was a showcase of competency, accountability and transparency. These were similarly applied to the administration of government revenue and expenditure in the provinces.
The oft-mentioned incident involving Ibn Lutaybiyah demonstrates this principle succinctly. Functioning as an Amil (tax collector) he returned to Madinah loaded with tax revenues, and asserted that a substantive portion of the revenue was given to him as tokens from certain people. The Prophet (pbuh) reminded him by saying: “What is wrong with the man whom we appointed as a tax collector and he said this is for you and that was given to me? If he stayed in his parent’s house, would something be given to him?” (Narrated by al-Bukhari)
On another occasion, the Prophet (pbuh) was quoted as constantly reminding his companions by saying: “Whomsoever we appoint over an affair, we shall give him provision. What he takes after that is breach of trust.” (Narrated by Abu Daud)
The four-guided Caliphs, the successors of Prophet Muhammad (pbuh) continued the benchmarks of competency, accountability and transparency in their administration of the state. Abu Bakr, the first caliph after Prophet Muhammad (pbuh), stressed the importance of accountability and the behaviour of individuals with authority in the community in his very first speech to the Muslim community after being elected as the Caliph by saying: “Cooperate with me when I am right, but correct me when I commit error; obey me so long as I follow the commandments of Allah and His Prophet; but turn away from me when I deviate” (Narrated by al-Hindi and Ibn Kathir). His other companions often held him to account for his decisions and state administration.
This was also the position of Omar al-Khattab when he was elected as the successor of Abu Bakr. In his maiden speech after being appointed as caliph, he stressed the need for accountability in his administration, and the rights of every empowered citizen.
It was reported that while Omar was delivering the Friday sermon, an ordinary person rose and interrupted saying, “O the leader of the believers, I won’t listen to your sermon until you explain how you came up with your long dress (Arabian robe)”. Apparently, there was some distribution of fabric to the people and given the measure of distribution and the height of Omar; he could not have made a dress out of his share. So, a vigilant voice of egalitarianism unhesitatingly challenged Omar, the leader of a vast caliphate. Omar’s son stood up, and explained that he gave his share to his father, so that a dress could be made to fit Omar. The vigilant voice then expressed his approval and sat down, and Omar resumed his sermon (Ibn Qutaybah, 2002: 1/55).
Omar’s policy on accountability was not limited to the primitive style of verbal complaints and condemnations from the public. As for the public offices, he established a specific office to deal with the public administrators’ accountability. The office was designed for the investigation of complaints that reached the Caliph against the officers of the State. When it was first established, Omar appointed Muhammad ibn Maslamah to take the responsibility of this ombudsman-like department.
In important cases Muhammad ibn Maslamah was deputed by Omar to proceed to the location, investigate the charge and take action. Sometimes an Inquiry Commission was constituted to investigate the charge. Whenever the officers raised complaints against him, they were summoned to Madinah, and the case was brought before the Caliph himself. The caliph also dismissed governors when the people complained against them; amongst them was the Prophet’s companion, Saad Ibnu Abi Waqqas due to the people’s complaints against him. The same function was conducted in a later phase of Muslim history by a specially designed office known as Diwan al-Mazalim, which can be understood as the classical version of the contemporary ombudsman.
Once while delivering a sermon, Omar said: “My rights over public funds (the Baitul Mal) are similar to those of the guardians of an orphan. If well placed in life, I will not claim anything from it. In case of need, I shall draw only as much as it constitutionally allowed for providing food. You have every right to question me anything about, any improper accumulation of the revenue and bounty collections, improper utilization of the treasury money, provision of the daily bread to all, border-security arrangements and harassment caused to any citizen.”
He was recorded by historians to have issued a certificate of witness by a group of elders to all duly appointed governors stipulating that the governor should not ride an expensive horse, or eat white bread, or wear any fine cloth, or prevent the people’s needs (from being satisfied).
The example of Omar showcases the practise of transparency where a ruler, as well as the state officers, should have nothing to hide from the public and is open to scrutiny of their usage of public funds.
Another example of accountability and public airing of grievances practised during the period of the rightly-guided Caliphs can be found in the famous letter written by the fourth Caliph, Ali ibn Abi Talib to his governor of Egypt, Malik al-Ashtar as recorded in the compilation of Ali’s letter and sermons, ‘Nahjul Balaghah’. In his advice to the governor, he asserts that: “Out of your hours of work, fix a time for the complainants and for those who want to approach you with their grievances. During this time, you should do no other work but hear them and pay attention to their complaints and grievances. For this purpose you must arrange public audience for them; during this audience, for the sake of Allah, treat them with kindness, courtesy and respect. Do not let your army and police be in the audience hall at such times so that those who have grievances against your regime may speak to you freely, unreservedly and without fear”.
All of these examples illustrate the importance and critical role of whistleblowing as another facet of ensuring competency, accountability and transparency in upholding justice and good governance. Whistleblowing has always been an integral component of the Islamic political culture strongly rooted in their ontological awareness since the very beginning.
Furthermore, Muslim scholars, both the past and present, have been very prolific in their writings on topics related to accountability and the practice of mazalim and hisbah (public inquiry). Amongst the most famous was al-Ahkam al-Sultaniyyah, the magnum opus of Al-Mawardi (al-Mawardi, 1995) in which he dealt with both the topics of mazalim and hisbah extensively. Another classical scholar, Ibn Taimiyah, also authored a book titled ‘Hisbah’ in which he discussed the issue of hisbah as a pertinent responsibility of every Muslim individual and also an obligation upon Muslim rulers (Ibn Taimiyah, 1985). Al-Ghazali, in the same token dealt with the issue of accountability of a ruler and his officers in his celebrated, ‘Nasehat al-Mulk’ as his advice to the prince of the Sultan during his time. However, it was the prominent vizier and scholar, Nizamul Muluk who smartly deliberated these topics in a very normative meaning in his illustrious treatise, Siyasat Nameh.
The aforementioned deductive analogies based on sound evidence from authentic religious texts, illustrates the nobility and righteousness of genuine acts of whistleblowing to encourage and promote competency, accountability and transparency in our societies. Even though there is no direct reference to modern day whistleblowing per se, the principles which it embraces implies that whistleblowing is part and parcel of a comprehensive scheme of good governance to achieve the highest goal of Islamic polity to ensure justice with fairness and mercy within the parameters of Maqasid al-Shariah. Moreover, the practice of whistle blowing is also considered as an act of worship. According to Yusuf Al-Qaradawy, “…. whenever a Muslim follows up good intentions with a permissible action, his action becomes an act of worship”.
The increasing acts of genuine whistleblowing, which we witness today, does not augur well for the state of trustworthiness and integrity of our political governance. The courageous acts of the few who have stood up against the establishment to expose the wrong doings of individuals in public office and the gross abuse of public funds are exemplary acts of piety in the pursuit of good governance to attain the well being of the society.
Regrettably, this noble cause is being led by a politician and non-scholars instead of an ‘apolitical’ or non-partisan entity or individuals. Civil society, free from the clutches of partisan politics should ideally be leading this whistleblowing initiative. We would dare add that Islamic-based organizations and the Muslim scholars due to their ontological-awareness ought to be spearheading this citizen’s watchdog initiative to guard and protect against waste and loss of public funds and abuses of public office. However, disappointingly, many of our Islamic scholars (Ulama) whom we had expected to be at the forefront of such righteous efforts in the realm of civil and political governance, are however engrossed by ‘red herring’ issues that in many cases only serves to polarise further the multi-racial and multi-religious make-up of Malaysian society. The failure of the Ulama to spearhead such an initiative would send a wrong signal to the lay Muslims, and convince them that whistleblowing is alien to the corpus of Islamic belief.
We hope that this distinguished and honourable endeavor will bring a new chapter and in essence, a new hope in the endless episodes of the struggle to uphold democracy and good governance in our beloved country Malaysia. As a consequence, we hope these efforts would evolve a more competent, accountable and transparent political governance.
Undoubtedly, there have been whistleblowing actions taken by our good citizens in the past. The current effort takes the whistleblowing initiative to a higher level of public engagement. The ‘National Oversight and Whistleblowers Centre’ is a very laudable effort to galvanise and institutionalize this endeavour, thus making it more structured, guided and professional.
We sincerely and unreservedly urge all civic-minded citizens of Malaysia regardless of race, religion and political affiliations to support this excellent whistleblowing initiative. Above all, we strongly encourage the Muslim community, religious scholars (Ulama) and Islamic organizations to embrace this civil society initiative in our shared quest of attaining competency, accountability, transparency, good governance and citizen well-being. We strongly believe that all these qualities are indisputably Shariah imperatives and pivotal pillars of the Islamic political norms that all Muslims should aspire to achieve.
This paper is titled “A Better Alternative to GST.” The GST is a one -track-mind solution that simply erodes purchasing power and is a further burden on the middle-income and poor. With the GST, all the government is trying to do is it increase its revenue base. In this paper we will argue that there are far easier alternatives that provide win win solutions to both the government and the rakyat.
Reading the New Economic Model, all credit must be given to the NEAC for the honesty and truth in its analysis. Most importantly it was a document free of politics. It is critical yet fair and it not only says what we as a people need to do, it spells out why we need to do it and what it foresees as our challenges in doing it.
The NEAC says our challenges come down to two: “the political will to change and the social cohesion required to enable change.” In the absence of political will and social cohesion, we will be mired in this constant venom spitting that plays in our news everyday.
We should think back for a moment of what were the conditions that allowed Malaysia to be the only one of thirteen countries in the world to achieve 25 years of 7% growth consistently. Our greatest success arose from our greatest tragedy, May 13, and that success was based on 3 things – the Rukun Negara which unified the society with a vision of the greater good, the creation of Barisan National (BN) which gave rise to political unity and the NEP which provided economic unity.
Unfortunately every success, when not well managed gives rise to unintended consequences and we had many along the way and each unintended consequence eroded our unity bit by bit and by 2008 all that was left was political rhetoric, slogans and visions of grandeur that not many believed in nor bought into.
We now sit at this critical inflection point where we know for a fact that not only are the best of Malaysians leaving for “greener pastures” so is Malaysian capital. More Malaysian money is being invested abroad than at home.
While we have the ETP, GTP etc. that promises to transform the country, to many Malaysians especially the bottom 40% of households that live on less than RM1,222 per month, all of these acronyms rings hollow. By the way, the next 40% live on RM2,957 per month while the top 20% live on RM8,157 per month. Nothing destroys the fabric of society more than unjust income distribution.
While the ETP’s and GTP’s are needed and will surely yield results we need to look for faster and more efficient ways of helping the lower-income population without invoking subsidies or revoking subsistence. The policy responses highlighted in the NEM -2 publication are good recommendations.
However, we believe there are some really easy things we can do, where the mechanisms, rules and practices are all already available and in place. We would like to give three simple things that we can do, very quickly and efficiently. All it needs is for us to stand back, look at the problem from the perspective of society and not industry and the solutions become obvious and the benefit of each solution flows into the next.
The fastest and easiest way to help the lower-income group is to change our paradigm on pricing of goods and services. This requires us to look at the issue from the point of view of the lower-income segment who have limited cash. The lower-income person see two things; quantity purchased and frequency of purchase. Because of limited cash, the lower income tend to buy small quantities but with high repeat rates of purchase. This often means paying the highest unit cost and incurring the most inconvenience. This pricing model is good for the producers as they earn the highest marginal profits and achieve better inventory turnover but what is good for the producer is not necessarily good for the lower-income.
However, if we changed our paradigm on pricing, especially for public services, we can actually end up with a win-win solution for both the provider and the consumers. Instead of pricing for quantity, lets say we price for convenience.
Let’s take a real example, public transport (we can use any category of consumer goods or service – toothpaste, diapers, milk and this will hold true). A one day RapidKL pass is RM 10, thus the daily cost of transportation is RM 10 and it has to be renewed every day. If you had a lot more cash you can buy a 30 day pass for RM150 and now your per day cost is RM5 and you only renew once a month. The one who has more money enjoys both a lower daily cost of transport and the convenience of renewing one a month. The lower-income individual pays the highest rate per day and suffers the most inconvenience of having to renew his pass everyday.
What if we change the model and made the daily pass RM5 and the monthly pass RM300? What would happen? Presumably, a lot more people will take the LRT on a daily pass and presumably the congestion to renew the pass on a daily basis will go up. For those who can only afford the daily pass they benefit from a cheaper ride. For those who don’t want the inconvenience of renewing everyday they just have to buy the more expensive 30 day pass.
From a usage point of view the system is now fair as everyone can ride the LRT for RM5 per day. But for those who also want the convenience, they can but they will have to pay more for that convenience.
Will the service provider earn more or less? I am willing to guess that they will earn more as more people can afford RM5 as compared to RM10 per day. This is an amazing real, tangible 100% cost reduction to the rakyat while increasing the utility value of a public good.
The second perceptive change that we should think of is ownership of public goods. Lets take the example of the NKVE, which was built to benefit the public. It is the longest toll road in the country and is very well managed. At the time of this writing, It was owned by PLUS a listed entity and EPF and UEM were in the process of buying it over from PLUS for RM 23 billion. This transaction is meant to address a number of issues, one of it which I guess, is how to deploy the huge savings in the EPF into productive assets for the long term benefits of its savers.
While this provides a long term benefit, it really doesn’t help the lower-income group. Can it be better done in a better way? Yes, if we changed our paradigm of the problem and look at it from a lower-income stand point. What if a RM23billion unit trust was created and we called it the PLUS Unit Trust. Its units are priced at RM1. First preference is given to the lower-income group to either buy the units directly or by using their EPF money. Now the lower-income group gets direct ownership in a real asset, enjoy the utility of the asset, earns back their investments through the dividends and hopefully growth their wealth through capital appreciation of the underlying asset. This how the rich get richer. All we are doing is extending the option to the lower income by making the entry price affordable.
Can the lower-income group afford RM 1 to invest? Of course. They just saved a real RM5 per day on the LRT which they now can use to invest in a real asset which otherwise would never be affordable to them.
What can PLUS do with RM23 billion? Invest in new public goods and services like building the MRT. Now we are really starting to see alignment between the government as the “wakil” of the rakyat and how it is aligning its actions for the benefit of the rakyat in a real and tangible manner. PLUS has been a trusted guardian of public interest and they probably have the skills and competence to keep on doing more good for the rakyat. This is now real corporate social responsibility. It is win-win-win for everyone.
The third perceptive change that we need then has to do with our RM407billion public debt. At 53.1% of GDP, we are sitting close to the edge of a cliff. The nature of public debt is that it is the safest form of debt for any lender but for the borrower it is a noose around our neck.
As much as we the rakyat resent the fact that the “our wakil” has racked up this debt, the reality is that we the rakyat will have to pay for it. With a deficit, the rakyat either pays through higher taxes to fund the deficit, or the government borrows and we and our children and maybe grandchildren pay via taxes tomorrow to repay the borrowing. There is no free ride. Since we are going to have to pay for it, why don’t we deal with the problem now rather than later.
The current debt service charge in the 2011 budget is at RM18.517 billion or 2.1% of GDP. This money simply vaporizes and has no productive impact. At the same time the IMF estimates that the savings rate in Malaysia is reported to be about 32% of GDP or RM256billion. Mind you this is not how much we have saved, but how much we are saving in a year.
What if, the Government, instead of borrowing this year, issues RM 200 billion of shares to the public (take your pick of the number, this is just outlining the concept) at RM 1 per share and the share would pay a divided equal to or a fraction of the growth rate of the GDP? (2011 growth rate is estimated at 5.5%) Wouldn’t it be a better return for the rakyat then putting our savings in a savings account today? if nothing else it will pay 2.1% as that is the interest cost to GDP at the moment.
The funds can immediately settle a huge portion of the debt which we are going to have to pay for anyway. The rakyat become investors and stakeholders into the economy and because this is a share, it can be traded on the stock exchange. If the government holds it self to good governance, we can envision the share price going up, and if the government doesn’t we will see the share price going down.
The government can even offer the government servants a share option scheme in the fortunes of the country and hopefully motivate them to work harder and be more productive. And mind you a large part of the low-income workforce is in the government. BNM can use a part of its reserves to hold some quantity of these shares. If there is a lack of liquidity in the market, BNM buys back the shares which will send the price up, and if there is too much liquidity, BNM can sell and price will come down.
The above are three simple things that we can do fairly quickly and will really help the lower-income segment of the population. They are practical and easy to do and will make a huge difference. But they do present a paradigm challenge.
Before you say no, at least take a moment to think about it. Ask, if we do it, will it help the lower-income groups in our society, will it help in the growth of the economy, will it help improve governance and will it unite us into a new shared vision for Malaysia?