The big question should be why is Elon Musk so happy to chat with Jokowi?
By now we have already plenty of information on how Indonesia (and also Thailand) is leading Malaysia by a large margin when it comes to automotive policy and also the electric vehicle ‘race’.
To start, we have had a staggered national automotive policy (NAP) due to the years of corrupt practices from our Malaysian Automotive Institute (MAI) who decided to rebrand themselves a few years ago to MAAri in order to widen their corruption game. Fueled by corrupt automotive media (two in particular) who gave them plenty of publicity they staggered the Malaysian automotive landscape to suit their personal agenda.
Today, MAAri is under investigation and their corrupt media partners are silent. This is Malaysia at its best.
Now, when it comes to Elon Musk, the big drama is all about Tesla electric vehicles and the opening of a car manufacturing plant, battery manufacturing plant and also the EV charging infrastructure which brings not only plenty of jobs, but also the rest of the electric vehicle business links.
So, why is Elon Musk ready to work with Indonesia and not Malaysia right now? Well, it is clear and precise government policy that gives confidence to Elon Musk to start operations.
Indonesian President Joko Widodo back in August 8, 2019, signed a regulation on the promotion of battery-powered road vehicles (PP No. 55/2019), a move that was welcomed by industry associations and gave car manufacturers a clear understanding of the Indonesian EV roadmap. This Malaysia and MAAri did not provide.
Indonesia’s government set a goal for EVs to make up 20 per cent of all domestic cars manufactured, equal to around 400,000 e-cars, by 2025. With motorbikes favoured over cars nationally, the government also aims to have e-motorbikes make up 20 per cent of the total domestic motorbikes production.
According to the Ministry of Industry, there are 15 domestic e-motorbike manufacturers with a production capacity of up to 877,000 e-motorbikes annually. Malaysia is not anywhere near this figure right now.
To sweeten the deal with all foreign car manufacturers, the Indonesian Ministry of Industry, set a goal to provide 1 million cars for export to the ASEAN region by 2025, of which twenty percent will be electric vehicles. We already see Hyundai doing this with the IONIQ 5.
New export markets would probably have to be tapped for this. So far, cars made in Indonesia are mainly exported to less developed countries in Asia, the Pacific, the Middle East and Central and South America, which have low purchasing power and are still lacking in infrastructure for battery-powered vehicles. Europe, North America and China are currently not among the target markets.
Among other things, the current Presidential Decree creates the legal basis for battery production, local content requirements, charging stations and possible tax incentives. For example, by 2021, electric cars produced in Indonesia must have at least 35 percent local content, at least 40 percent by 2023, at least 60 percent by 2029, and at least 80 percent by 2030. How exactly these seemingly high-priced shares are measured is not described, though these may be specified in subsequent regulations.
In addition, the Presidential Decree allows electric vehicles to be partially dismantled (IKD – Incompletely Knocked Down) or partially (CKD – Completely Knocked Down) – as long as the domestic industry cannot produce the required components. Moreover, until local companies are able to ramp up their own production, complete electric vehicles (CBU – Completely Built-Up) may be temporarily imported.
Electric charging stations should be easily accessible according to the regulation and they should have their own parking spaces. They are to be created primarily at petrol stations, shopping malls, rest areas, government buildings and apartment complexes. The development of a charging infrastructure should be fiscally promoted.
The production of electric vehicles should be supported by tax and non-tax incentives. The tax incentives include the reduction of import duties on components or the promotion of exports and the promotion of research and development. A non-fiscal measure could be about the exemption of electric vehicles from certain driving restrictions, such as the odd-even license plate policy currently implemented in Jakarta.
Next is a simple numbers game. Indonesia has a large vehicle market compared with other ASEAN countries. Its two-wheeler market is twice as large as that of the next largest in the region and it was the 2nd largest passenger vehicle market in the ASEAN region in 2020.
In 2019, total domestic sales of passenger cars, buses, and trucks published by the Association of Indonesia Automotive Industry (GAIKINDO) were 1,030,126 units and total domestic sales of two-wheelers as published by the Association of Indonesia Motorcycle Industry (AISI), were 6,487,460 units. Malaysia is just a fraction and it is not growing as our currency and economy takes a beating.
Source : DSF
Tesco divested its assets in Malaysia. The IBM Global Delivery Center relocated its head office out of Malaysia. Malaysia-innovated ride-hailing service Grab set up its head office in Singapore rather than Malaysia. Other Malaysian high-tech companies that chose to start-up outside the country include Coin Gecko, a platform for multiple crypto-currency comparisons, and BigPay, a Malaysian banking app, also to Singapore.
Multinationals say no way
Malaysia has missed a host of opportunities for innovative multinationals to set up in the country. These include Google, Amazon, Uber Technologies, Allianz, Vodafone group, and Akzo Nobel. Most moved to Singapore because of Malaysia’s relatively poor infrastructure, the poor level of human capital skills, and the poor regulatory framework. Zoom Video Communications has selected Singapore over Malaysia for their first R&D center in the region.
Not least of the reasons for this is that Malaysia is one of the world’s most highly regulated economies – regulated mostly to protect ethnic Malays – stagnating in innovation as incentive drains from the business community and hampering an environment that should be primed for modernization. This is going to make it worse.
The equity pipe dream is a vestige of the New Economic Policy (NEP), implemented in 1971 in the wake of disastrous race riots, which has granted vast privileges for Bumiputeras, mostly ethnic Malays, who make up nearly 70 percent of the population, and has been a millstone around the economy’s neck for 70 years.
In the public sector, Bumiputera companies have opportunities ahead of other concerns. They have exclusive ownership rights to Malay reserve land and business advantages through restricted licensing. Mostly they have used those opportunities to loot the public treasury through rent-seeking and outright corruption.
The NEP hinders the development of new innovative supply chain systems that could potentially bring the government sector savings and better-quality products and services, rather than relying on a cohort of suppliers that see the government sector as a captive market. An open market for procurement would save the government massive amounts on purchasing budgets. Malaysia is one of the few countries in the world where the government doesn’t seem to have a concern about buying better.
The pending imposition of the 51 percent Bumiputera equity rule in the freight forwarding industry has signaled that successful businesses are not wanted. There are already stories of non-Bumi freight forwarders preparing to relocate to Indonesia, Singapore, and Australia. Some are reconstituting their businesses as foreign companies which can be 100 percent owned. This will bring an outflow of profits, and Malaysian ports will be treated eventually as nothing more than feeder and trans-shipment points. Restriction of who can own a business is not conducive to innovation. Restrictive equity laws just encourage the best and most innovative companies to leave and go off-shore.
Loss of Incentive
The 51 percent equity in SMEs across a number of industries, along with the requirement for companies dealing with the government to have at least 30 percent Bumi equity, has lasting consequences. The loss of 51 percent of the equity means loss of control of the business the entrepreneur built, to someone who probably has no idea how to run it.
Having a business idea, the capital required and access to potential markets is not enough. Non-Bumiputera entrepreneurs must also find a suitable partner to invest. This is highly impractical, if innovation is to be nurtured from the enterprise start-up, where entrepreneurs must undertake tireless work, risk, and uncertainty for months or even years, most often without any wage or income.
In such situations, it is difficult if not impossible to find willing investors not used to gargling at the public trough who won’t exploit the situation. History has long proved that Bumiputera investors won’t be willing to take the same risks. Most want a guaranteed income, regardless of the stage of growth of the company or performance. There are very few Bumiputera venture capitalists within Malaysia’s population.
The equity rules are totally unsuitable if Malaysia seeks to become a creative nation, using the engine of innovation to grow and add value to the economy. The rhetoric of transforming from a low cost, low technology economy to an innovation-led Industry 4.0 economy just doesn’t match the regulations in place today. There is no incentive, it is just not going to happen.
Equity Rules are Promoting Inequality
Malaysia’s GINI index, a measure of the inequality of income is 41, according to the World Bank. If income was distributed perfectly equally, the score would be zero, while 100 would represent perfect inequality. According to World Bank data, the lowest 10 percent of national population earned 1.8 percent of household incomes, while the top 10 percent of households earned 34.7 percent of income. With the poverty rate at 5.6 percent in 2018, and growing quickly due to the pandemic, the income gap is widening even more.
The equity policy requiring either 30 or 51 percent Bumiputera equity, depending upon the circumstances, favors wealthier Bumiputeras to invest and get richer, thus further widening the wealth gap. There is little, if any benefit of equity requirements in assisting their poorer brethren, to increase their income and wealth. They are the forgotten Bumiputeras in the government’s over-regulation of equity. The equity rules will help the rich get richer and the poor become relatively poorer.
The Super Makmur Tax on Companies
A one-off super tax on companies with RM100 million turnover or more from 24 percent to 33 percent in 2022 is a concerning precedent. Unfortunately, governments have poor credibility when they make promises about tax. This could potentially accelerate the exodus of large local companies exiting Malaysia and discourage foreign head offices to locate in Malaysia.
Malaysia is one of the countries most affected by brain drain. About 1.7 million Malaysians are working overseas, with 54 percent of them in Singapore, 15 percent in Australia, 10 percent in the United States, and 5 percent in the United Kingdom. This is not just because of the increasingly fraught racial situation, which UMNO and its allies have exacerbated but also reportedly partly because of the lack of career prospects in Malaysia, not only for non-Bumiputeras, but for Bumiputeras as well, Many ethnic Malays have gone overseas to work in higher education, medicine, research, and the management sectors. Many blame the repressive corporate culture within universities, the civil service, and corporations.
Although the brain drain has slowed due to the Covid-19 crisis, the government’s insistence on enforcing repressive equity policies and overall poor growth of the economy to provide lucrative markets for new innovations, will no doubt speed up the exodus of qualified professionals once again, when travel is fully open once again.
The government has long acknowledged the problem through the formation of the Talent Corporation Malaysia Berhad (Talentcorp) to bring back talent to the country as long ago as 2011 but has botched it despite recognizing it. Talentcorp has approved 5,366 applicants to date. However, bureaucratic complexities and strict immigration rules forbidding their non-Malaysian spouses to work, gain permanent resident status, and citizenship, makes a return for many impossible.
Due to Malaysia’s current repressive regulatory framework, local innovation-based company start-ups are being hindered. Malaysia is becoming unattractive as the location of international high-tech companies. The World Bank Group ranked Singapore the second-best country in ease of doing business, while Malaysia was ranked 12th in the 2019 survey.
Malaysia will be greatly disadvantaged during the region’s recovery from the Covid-19 crisis if it doesn’t have domestically driven innovation to attract international high-tech investment. At the same time, Malaysia’s infrastructure and cost base are relatively unattractive to other locations like Thailand, Vietnam, and Indonesia. This means Malaysia will lose out big time with pundits expecting a renaissance as the world comes out of the pandemic. Don’t expect one in Malaysia.
MALAYSIA NO LONGER ABOUT CREATING WEALTH OR SHARING WEALTH BUT RATHER ABOUT GRABBING WEALTH – 51% EQUITY GRAB, NEW QUOTAS & USING EPF MONEY TO HELP STRUGGLING BUMIPUTERA COMPANIES
Some of the news on the political front never ceases to amaze me. Just when you think it can’t get any crazier … a whole new level of crazy comes out.
Earlier this week a politician suggested that land owned by the Urban Development Authority (UDA) be turned into wakaf land – private property endowed to the community for common use under Islamic laws.
The logic is that so much of the earlier land assets belonging to UDA had been used with, or maybe under the instruction of, non-Muslim (meaning non-Malay) parties in ways that hurt the Malays.
Another politician raised the idea of using EPF money to help struggling Bumiputera companies, given the EPF had invested in foreign and non-Bumiputera (again, meaning non-Malay) companies locally and abroad.
And yet another politician suggested those with large EPF savings subsidise those with smaller savings. Given that some accounts are so small even doubling or tripling their entire amounts won’t make any difference seems lost in the debate.
It would help if those politicians shared some of the vast wealth they’re keeping for their own seven generations to help the poor. For me as a retiree, if even my EPF savings aren’t safe from politicians, I’d just withdraw every single sen and keep it under my bed. Then I’d only have to worry about rats.
I’m sure there’s a difference between an investment, a bailout and a haircut, but perhaps I’m just being pernickety. I can only hope EPF knows that, too, and will stick to their mission. Given that most politicians don’t keep any money in EPF, I know they wouldn’t care about this.
But for the rest of us whose retirement savings are in EPF and not in some tax-free havens and don’t have generous businessmen friends making regular donations, we’re a little bit concerned, aren’t we?
Now what do we make of this?
First, there’s some level of desperation not seen before. Perhaps it’s the pandemic, unless the Semua Saya Sapu party is back, if it ever went away in the first place.
Second, a game of upmanship, with many desperately looking for the next idea to champion the plight of the Malays – after the 51% equity grab, new quotas, tons of money in the latest budget etc. These seem to be just the latest shots.
Third, the seeming lack of awareness of how embarrassing such antics are to the rest of the non-political Malays. The Malays have a saying about this. (We have many sayings about this actually, and none of them are very flattering.)
True to form, these ideas all involve diversion of money that belongs to somebody or something else into some black holes where there’s absolutely no transparency and accountability.
What are the chances of these schemes working? Basically zero. If such schemes do actually work, it would’ve cured the issues of Malay economic weakness decades ago, and with billions to spare.
I think the Chinese would love to see Malays become rich. While they can’t sell pork, alcoholic drinks or casinos to the Malays, they can still sell high-end condominiums, luxury cars and other expensive stuff. If you’re in business, you’d love to see a growing and prospering market.
If you’re a politician though, who’s key message to your constituents is that they’re easily confused, weak, and in constant danger of being overwhelmed, your calculus may be different.
I’ve written earlier about how the focus in the Malay mindset nowadays is all about rights, even if some of the rights are self-invented, and not about responsibilities. As we travel through the new Keluarga Malaysia days, things seem to have become even worse.
There’s a wilful effort by those in power to ignore what has happened, and to refuse to learn any lessons and find new solutions to achieve the Malay economic goals. We’ve gone from using public funds to grabbing ownership of the wealth of others; now it’s wanting to divert what’s literally money belonging to you and me.
We need a total review of the various affirmative actions since the first days of the New Economic Policy 51 years ago, and its successive and seemingly unending programmes which get more and more expensive, unjust and divisive.
Of the money given directly, I’d say the money given towards education has been the most successful, but even this has become less effective as education itself has become highly politicised and dumbed down.
I was a recipient of such help for my education. If it wasn’t for that money, I’d still be a poor fisherman scouring the coastal waters of Penang for ever-decreasing catches. I feel indebted to it for the rest of my life, even if my taxes have paid the debt back many times over.
Had it been pure meritocracy in those days, I’d never have been able to make it against those who had the best education from their urban enclaves, who didn’t have to collect water from wells, look for firewood or worry about the next meal.
The whole point of affirmative action is to create a fairer future, by tilting the scale here or there, rather than just rewarding the past, which would only give the haves even more, and the have-nots even less, with the inevitable dire consequences.
So, I’m all for affirmative action, provided it’s based on needs, and not based merely on race and not for it to be diverted into somebody’s pockets to take care of themselves for seven generations.
Our affirmative action programmes unfortunately have caused the Malays to become dependent on the government, whether through subsidies and grants, or government jobs, contracts and quotas, or dishonestly such as through corruption, rent-seeking and illegal leakages.
This, coupled with a society that has become dumber and more docile through the playing up of the flames of racial sentiments, has created ever-deepening insecurity in the Malays, in spite of decades of increasing political dominance and an overwhelming control on all levers of power.
Could such proposals come to pass? Possibly, in the latest, more desperate version of Malaysia Boleh, where literally nothing is sacred. The politicians have no idea how to generate wealth through hard work and smart economic policies, and can only race each other to come up with crazier ideas.
It’s no longer about creating wealth, or sharing wealth, but rather about grabbing wealth.
Remember the good old days of “Mr. 10%” being the typical profile of the corrupt person? Don’t we wish for those “good” old days where the leakage was merely 10%? Now, we’re lucky if 10% comes out of the other end after all the leakages.
The truth of the matter is, all these leakages will be paid for by our next generation. They’ll grow up in a harsher environment, with crumbling infrastructure that we can’t fix and a destructive environment we had ignored, and a free-for-all political system that we’ve corrupted.
They will curse our generation, especially those who got rich and powerful by keeping the majority of the people dumb and scared, and perhaps the rest of us, too, who knew better, but didn’t speak against such injustices.
Their curse may last for seven generations.