The 1976 Budget presented by the Finance Minister last Thursday and the accompanying Treasury/ Economic Report 1975-1976 raised many big questions about the health and future of the Malaysian economy, like the weakened Ringgit, the poor economic performance of the country, mounting unemployment, continued high rate of inflation, rising public debts, the new tax proposals, and the failure to make any appreciable progress to eliminate poverty and redress economic imbalances between the haves and the have-notes.
I shall deal with these various issues.
The Weakened Ringgit
Malaysians can still remember that after Malaysia terminated the currency Interchangeability Agreement with Singapore on May 8, 1973, and the float of the Malaysian currency on June 21, 1973, Malaysian Ministers and leaders did not miss a single opportunity over radio, television and through the Press to point to the appreciation of the Malaysian Ringgit vis-a-vis the Singapore Dollar as proof of the strength of the Malaysian currency.
The budget speech of the former Finance Minister on 5th December, 1973 and the accompanying 1973-1974 Treasury Report also gloated about the strength of the Malaysian Ringgit vis-à-vis other currencies.
I am surprised therefore that the Finance Minister makes no reference whatsoever to this important question in his Budget speech, although confining himself to “bread development, trends and policy issues” in view of the accompanying Treasury 1975-1976 Economic Report.
But in view of the former claims of the Government Ministers and leaders that the appreciation of the Malaysian Ringgit vis-à-vis Singapore dollar indicates the strength of the Malaysian Ringgit, in the absence of further explanations and clarifications from the Government, the people cannot be blamed for having the widespread impression that the depreciation of the Malaysian Ringgit vis-à-vis the Singapore Dollar and that of the US Dollar and the Japanese Yen indicates weakness and instability of the Malaysian Ringgit.
The Government has retreated behind standard technical explanations, namely the international money market forces of supply and demand, to explain the depreciation in value of the Malaysian Ringgit.
Thus, on Oct 31, the Finance Minister in reply to a question to explain why the Malaysian Ringgit has fallen in value, answered:
“Kadar pertukaran Ringgit, seperti jugs dengan kadar pertukaran lain-lain matawang, adalah ditetapkan di pasaran pertukaran wang asing oleh pembeli-pembeli dan penjual-penjual matawang tersebut. Jika jumlah orang yang hendak membeli matawang tersebut lebih banyak daripada orang yang hendak menjual, harga atau nilai matawang tersebut mungkin naik. Samalah juga halnya jika sesuatu matawang itu sangat-sangat diperlukan oleh pembeli melebihi daripada mereka yang hendak menjual, harga matawang tersebut akan naik juga.”
“Sebalik, jika ramai penjual atau penjual tersebut sangat perlu menjual sesuatu jenis matawang, maka harga matawang tersebut akan turun. Adalah disedari bhawa keadaan permintaan dan penawaran dipasaran, berubah dari masa ke semasa, dan dengan sebab ini, nilai matawang laximnya turun naik.”
This retreat into economic terminology, which does not give the full picture, will not be sufficient to convince Malaysian about the factors for a weakened Ringgit. The Malaysian public, though no economist, knows that while a buoyant economy, with a rapid rate of growth, sound fiscal machinery and political stability would strength a currency, a deteriorating economy and a corrupt, inefficient civil service, together with unstable social, political and security conditions, would send the currency plummeting down the chart of world currencies.
The questions ordinary Malaysians want to know is why there is a fall in demand for the Malaysian Ringgit resulting in the fall in its value.
Economists group into three great categories the reasons that impel people to exchange currencies.
The first and most obvious category of international remittances is in respect of ordinary trade, which includes not merely the purchase and sale of goods that can be seen and handled, but also the purchase and sale of services. In other words, both visible and invisible trade.
The second great category relates the movements of capital and interest on capital. And the third category is that of speculative transactions- where people may wish to acquire the Ringgit for no reason other than their belief that the Ringgit is about to rise in value relative to other currencies because they fear that it is going to fall in value.
In my mind, all these three factors exits and combine to weaken the strength of the Malaysian Ringgit.
Firstly, the international recession caused Malaysians balance of payment position to deteriorate and net international reserves are estimated by the Treasury (p.95) to decline by about $100 million by the end of 1975, after seven consecutive years of reserve build up. The traditionally strong merchandise account went into a deficit for the first time due to the sharp decline in export earnings as the major export commodities suffered sharp deteriorations in prices and export volumes. Although imports weakened due to falling domestic demand, it declined less rapidly than exports while import prices at the same time continued to increase. The deterioriation in the terms of trade is therefore expected to be fairly substantial.
We are told that the account on goods, services and transfers, or the current account, for the first time is estimated to register a deficit of over a billion dollars.
Reduced Investment inflows and outward movement of domestic Capital
Secondly, there has on the one hand been reduced investment inflows, while on the other hand, an outward movement of capital out of the country.
Latest estimates point to an increase in private investment of only 2% in current prices compared to an increase of 55% that took place in 1974.
Thus, total fixed capital outlay reached $2,520 million in 1975 and constituted about 13%of the GNP. In real terms, however, private investment is estimated to have declined by 5% compared to the increase of 37% in 1974, and the Budget estimated increase of about 4%.
This is due not only to the generally sluggish private investment because of depressed world economic conditions, but because of the shying away of foreign investment from Malaysia.
It was this reason which prompted the Finance Minister to address himself directly to foreign investors in the Budget speech when he said that the Government “welcomed and indeed encourage” private investment, and added:
“It may be however, that some uncertainty has been due, in some cases, to the interpretation and implementation of certain policies. In these cases of doubt, investors should seek clarification from the Government. It will be unfortunate if investors form the impressions of Government’s attitude to private investment on the basis of rumours.”
It was this reasons, again which prompted have the organising and holding of the recent Malaysian Investment Seminar in Kuala Lumpur and other such-like seminars in European capitals.
While both domestic and foreign investors have understandably been agitated by the passage, without prior consultation of industrial sector, of the Industries Co-ordinating Act, and while the Government has turned a deaf ear to calls for its repeal, it is dubious how successful the Government has been in regaining the investors’ confidence about the investment climate, conditions and future of Malaysian.
In fact, there has not only been a reduced foreign investment inflow, there has been an outward movement of domestic capital abroad in recent months. And it is generally believed that Barisan Nasional leaders, not only are sending their children abroad to be educated, but are sending their wealth abroad for safe-keeping.
Psychological factors of the weakening Ringgit from political, social and security instability.
This brings us to the third factor causing the Ringgit weakness, namely the Psychological factors causing loss of confidence in the currency arising from perceptions of political, social and security instability of the country – which is the bigger cause of the reduction of investment inflow and the outflow of Malaysian capital.
Following the communist successes in Indo-China early this year, there has not only been an intensification of the jungle guerrilla warfare, but the beginning of urban guerrilla warfare.
This battle and challenge of the Malayan Communist Party can be won only by winning the hearts and minds of the people. The Finance Minister, in his Budget speech, has confessed that “we have not yet achieved national unity.”
In Malaysia, there is at the same time an aggravation in the polarisation of classes, arising from the obstinate refusal of the Government accept in principle and practice that Malaysian nation-building can only be firmly established by policies which recognise the fact that Malaysia is a multi-racial, multi-lingual and multi-cultural society, and that the first priority of the government should be to help the poor of all races.
The perceptions of political, social and security instability is also strengthen by the failure or inability of the Government to stamp out corruption, especially those stemming from high public positions; abuse of power like the arbitrary and unjustifiable detention of Dato James Wong and others not prepared to kowtow to the line laid down by the ruling parties; the alienation of the student community from the Government, and the consequent repressive laws taken by the Government; the constant erosion of democracy and human rights of citizens.
Lately, the Government’s promulgation of the Essential (Security Cases) Regulations which so drastically abrogated the legal, constitutional and human rights of Malaysians, dealt a serious blow at the Rule of Law, and can only further confirm the perceptions about the political, social and security instability of Malaysia.
It was highly improper for the Essential (Security Cases) Regulations and the Essential (Security Cases) (Amendment) Regulations to be made by Section 2 of the Emergency (Essential Powers) Ordinance No.1, 1969, when firstly, the 1969 /emergency covered different circumstances from those facing the country today, the secondly, when Parliament had already been summoned to meet.
In fact, the impropriety is so manifest that it tantamount to an usurpation of Parliamentary powers and functions by the Executive, another reason why such Regulation can only intensify anxieties and reservations about the political, social and security stability of the country.
The Regulations, in presuming guilt until proof of innocence, also violates the Universal Declaration of Human Rights 1948.
Article 11 of the Universal Declaration of Human Rights states:
1) Everyone charged with a penal offence has the right to be presumed innocent until proved guilty according to law in public trial at which he has all guarantees necessary for his defence
2) No one shall be held guilty of any penal offence on account of any act or omission which did not constitute a penal offence, under national or international law, at the same time when it was committed. Nor shall a heavier penalty be imposed than the one that was applicable at the time the penal offence was committed.
The Security Cases Regulations provides for retrospective effect, and runs afoul of Article 11 of the Declaration twice.
Malaysia has already fallen short of many rights and freedoms enunciated in the Universal Declarations of Human Rights. These Regulations will make Malaysia violate many more rights enunciated in the Universal Declaration of the Human Rights, and put Malaysia farther and farther from the accepted standards of civilized nations. These developments cannot contribute to political, social and security stability.
I do not wish to enter into a full debate on the Security Cases Regulations, as I have a motion on the Order Paper calling for its repeal. I hope that the Government would honour its undertaking and allocate at least one full day for a debate on it, and I would leave this subject reiterating the Dap call for its repeal.
Economic development and progress is inseparable from political and social stability, and it is in these fields that we would want the Government to be more perceptive, more open-minded and more sensitive to the legitimate and nationalistic the mainstream of government concern.
Poor Economic Performance
On 27th Oct, ten days before the Budget presentation, the Prime Minister, in a keynote address to the Malaysian Investment Seminar in Kuala Lumpur designed to regain the confidence of private investors and re-establish credibility positive growth between 2 to 4 per cent in real terms.
Yet ten short days later, on November 6, the nation and the world was shocked to be told by the Finance Minister that Malaysia’s GNP grew by about only 1 to 2 % in real terms this year.
What happened between Oct 27 and Nov 6? This incident is not calculated to enhance international credibility about the pronouncements of our leaders.
The Malaysian economy performed poorly this year, a big fall from the 5%growth in real GNP for 1975 estimated in the 1974 Budget last November.
Although the unexpected prolongation of the world recession was an important cause for this dismal showing in the economy, it is misleading and erroneous to put the entire blame on international factors as the Treasury is doing.
I submit that the GNP in real terms would have been one or 1.5% more, if the Government had wielded the big axe and pruned and exercised economic mismanagement inefficiency, waste and rampant corruption, which introduces an element of irrationality in economic planning and fulfilment and impedes economic performance.
For instance, Federal Government investments and loans for public authorities and other bodies increased substantially, during the Second Malaysia Plan period. In line with the strategy of the New Economic Policy of direct participation in commerce and industry, the Federal Government has invested large sums of money in about 24 public authorities and companies over the last five years. Loans to States, public authorities, companies have also increased substantially during that period with the creation of a number of statutory bodies and companies to implement the New Economic Policy.
According to the Treasury Economic Reports, as at the end of 1975, Federal Government investment in these bodies would have stood $829 million. Total loans outstanding granted by the Federal Government to public authorities, States, State Economic Development Corporations and companies stand at $3,136 million in 1974.
Loans to State Economic Development Corporations will reach $276 million in 1975. Almost all these loans are granted on very easy terms and involve a large element of subsidy.
There are however no effective monitoring mechanism to control and check the spending of these public funds. Many of them are making losses, and are even unable to meet the principal and interest commitments due to the Federal Government. In most cases, published information about their results is scarce and tardy and there is little attempt at financial control. The SEDCs, for instance, are required by law to make annual reports to their respective State Assemblies, but this is more honoured by the breach. Many of these public authorities which wield astronomical budgets are badly planned and extravagantly managed.
This is good money down the drain, a colossal waste of public funds and resources.
I am all for public authorities to speed up economic development to help the poorer strata of Malaysians, but they should not be excuses for creating an elite of government managers, whose output are not matched by the inputs of hundreds of millions allocated to them.
Let every public authority and company in receipt of public funds and even loans, like PERNAS, FIMA, Bank Bumiputra, Malaysian Airlines System etc. be required to be accountable every year for their stewardship, and in this connection, as vast public funds are involved in these public authorities and companies, either they should come within the purview of the Public Accounts Committee of Parliament or special Parliamentary committee on Public Authorities and Companies to scrutinise their management of public funds.
Any company or authority given a $100 million would be able to show some results and attract huge publicity, but may not be able to prove that it is economically viable.
The Treasury Economic Report attributes the “positive rate of growth in GNP in a year when a number of developed economies recorded zero of negative tares of growth” to its counter-cyclical policy, which “stimulated the economy through increases in public expenditure”.
$100 million government wastages
Thus public consumption which increased by 17% in 1974 increased further by 19% in nominal terms in 1975 (+9% in real terms) to reach $4,835 million reflecting mainly increases in wages in the public sector and increased purchases of supplies and materials.
The question that comes to mind is whether the purchase of supplies and materials, which constitute 35% of public consumption, or some $1,700 million, was some economically, or with great extravagance and waste.
Here I wish to bring up the Treasury ruling with regard to the award of tenders for government supplies and materials, which provides that where the tender price by a bumiputra tenderer does not exceed 10% of a competing tenderer, the tender should be awarded to the bumiputra.
I know that international and local firms are in the habit of submitting two tenders, one under their original firm name, and another tender, in the name of a bumiputra which is 10% higher than their own tender.
Thus, in a Ministry of Health tender for instance, an international pharmaceutical firm may put in a tender of $1million for medical supplies and materials. At the same time, this firm would get the help of a bumiputra who lends his name to put in another tender for $1.1 million. The tender is awarded to the bumiputra tender, and the extra $100,00 public money is then split up, probably 50-50 between the international firm and the bumiputra who lends his name.
In this manner, the international firm makes more money while the public has to pay more. I submit this system cannot help one iota to uplift the poor Malay masses, but can only put the country into greater economic hardships and create a parasitic class of new, unproductive rich.
Thus, out of the $1,700 million government supplies and materials, if 10% goes towards this parasitic form of payment, then the public and country loses $170 million, which can be more productively used to generate employment and fight poverty.
There must have been quite a number of millionaires who made their millions through this easy, unproductive and parasitic form.
The government should put a stop to such squandering of public funds which can be better used to help the Malay peasants and fishermen.
Malaysia should find new export markets in West Asia and China
In 1975, the merchandise exports are estimated to have declined by 13% to $8,900 million following the prolonged recession in the economies of Malaysia’s major trading partners.
The Malaysian Government is not doing enough to reduce Malaysia’s export dependence on Japan and the West. T call for more energetic and dynamic approach by the Malaysian government to find new export markets for Malaysian products in West Asia, China and Eastern Europe, by sending more trade and economic missions to these countries.
Call for Petronas to be made directly answerable to Parliament
The most surprising figure in the Estimates of Malaysia’s Federal Revenue 1976 are the columns showing the 1975 estimated and 1975 revised royalties which the government would collect from petroleum royalty.
The estimated royalty to be collected in 1975 was %150 million, while the revised estimates of the petroleum royalty has now been slashed by some 35% to $97 million.
This is indeed the biggest short-fall for any item in the list of taxes, and calls clearly for an explanation by the government, especially as it had made so much propaganda in the past about the big revenue which Malaysia will get from the series of discoveries of ‘black gold’ in the country.
The present arrangement where petroleum is removed from direct parliamentary control and scrutiny, as the Chairman of Petronas although possessing Cabinet status is not directly responsible to Parliament but to Prime Minister, is most unsatisfactory, particularly as petroleum possesses such great potential to be the country biggest revenue-earner.
This unsatisfactory arrangement is highlighted by the series of contradictory statements that have been made about the petroleum industry under Petronas responsibility.
This Finance Minister’s estimate in his Budget speech last year to net $150 million from petroleum royalties in 1975, which would make it the second highest revenue-earner after palm oil besting even that of rubber, was clearly based on expected phenomenal increases in the production of crude oil.
Thus, the Economic Report 1974-1975 (page 64) had this to say about petroleum production prospects:
“By 1977, Malaysia should produce 200,000 barrels of oil per day and by the end of the decade 400,000 to 500,000 barrels per day. Some of the newly discovered finds in Sabah which have begun commercial production in October are expected to Produce 40,000 barrels of crude oil per day from next year.”
“Total production in 1975 is estimated to increase by about 70% to reach a daily production rate of about 136,000 barrels.”
This 70% increase in crude oil production, which would net Malaysia an extra $100 million in royalty as compared to 1974 did not materialise. Instead, according to the 1975-1976 Treasury Economic Report, the production of crude oil in 1975 stands at 90,000 barrels a day. This 1975 production figure is even lower than that of the 1973 figure, as given in the 1973-1974 Economic Report, which put production that year at 95,000 barrels.
Malaysia has not only missed the boat in earning $150 million from petroleum royalty in 1975, but seems to be going backwards.
Such vast differences in estimates in production and revenue is most unusual to say the least, and clearly calls for an explanation by the Honourable Finance Minister or in the Treasury economic Report and not to be glossed over as it seems to have been done. In face, such vast differences in production and revenue estimates involved such colossal errors in planning that those responsible must explain to the people for such short-falls and this type of planning and projections cannot but create doubt about Petronas.
Petronas, therefore, must be brought directly within the accountability or Parliament, and I therefore urge the Prime Minister to take the necessary steps to effect this as oil production is too important a subject to be removed from the direct control and scrutiny of Parliament.
PETRONAS needs a full-time chairman
The production of oil in Malaysia would serve as a catalyst to accelerate the economic and industrial development by way of refinery construction, development of petro-chemical industries and marketing activities, and the creation of employment opportunities.
It is precisely because of this central role of petroleum in the Malaysian economy that it is imperative that Petronas must have a full-time chairman, fully committed in his time, energy and whole being to put Malaysia onto the petroleum map.
While I fully respect the ability and talents of Tengku Razaleigh I have no doubt either that with his hand in so many irons, like Bank Bumiputra, Pernas Securities, and a whole host of others, he would not be able to spare his full time and commitment to bring this infant industry into the ranks of Malaysia’s industrial giants in the shortest possible time.
Petronas must push ahead with oil exploration and production, and as there is a long time-lag between discovery and commercial exploitation Malaysia cannot afford to make half-hearted approach but must give it topmost industrial priority.
If we should continue to drag our feet, and our production instead of increasing keeps decreasing, than we will be written off from the oil race.
The longer we delay to explore and commercially exploit our petroleum resources, the higher the costs of doing so in future, the lower the profits the country will make. Further, the whole international oil picture, and particularly in this part of the world, may have changed so radically by that time that Malaysia would not be able to derive maximum benefits from our petroleum resources.
Petronas should know that the People’s Republic of China is fast becoming the new oil giant in the world. According to conservative estimates, china’s onshore reserves alone could easily total 76 billion tons, equal to the North Sea and Alaska’s North Slope combined. Some Western oilmen and intelligence experts even equate Chinese reserves with those of the entire Middle East.
This year, China is expected to pump 80 million tons of oil, and with exploration currently going on at over 69 sites, the total is expected to hit 2000 million tons by 1980 and to equal the current Saudi Arabian production of more than 400 million tons annually by 1988.
By the time our delayed exploration and exploitation of petroleum gets the black gold out of the pipeline, we may find ourselves edged out of the oil markets.
Creation of a Just society
In the concluding part of his speech, the Finance minister said the Barisan Nasional Government is fully committed to the creation of a Just Society; fully committed to the programme of social integration and more equitable distribution of income and opportunities for national unity and progress; fully committed to reduce and eventually to eradicate poverty among all Malaysians, irrespective of race, and fully committed to restructure Malaysian society in order to correct racial economic imbalance in the context of an expanding economy.
I want fully to believe him, just as I am sure, and all Malaysians want fully to believe these words. But what we need are not mere statements, but words backed by deeds.
We see so many instances of government practice and policies which deviate from those commitments, that the ordinary people cannot be blamed for being cynical.
Thus, the commitment to effect social integration and to eliminate poverty regardless of race, is not reconcilable with the racial composition of Felda settlers, which is predominantly of one race.
Up to mid-1975. Felda has resettled about 31,158 families or about 200,000 people in 100 schemes. The Minister of New Village, Mr. Michael Chen, said last month that the country’s 450 new villages would change their racial outlook of being either predominantly Chinese or Malay, by the government offering cheap housing or land to other under-represented racial groups in the expanded areas of the new villages.
This is good, but the question that immediately cries out for answer is what is being done to stop new government land settlement schemes like FELDA from being identified with one racial group, and what is being dong to multi-racialise the FELDA schemes which are the recent creations of the government under the Second Malaysia Plan?
I would call on the Government to prove its commitment to social integration and the elimination of poverty regardless of race as the rural poor are also to be found among all racial groups, by taking urgent corrective action to multi-racialise Felda schemes.
Re-structuring of racial economic imbalance used by Malay rich to exploit Malay poor
During the debate on the Mid-Term Review of the Second Malaysia Plan in November 1973, I said that what has sometimes made the New Economic Policy to restructure society highly objectionable is the fact that this is used to benefit not the poor, have-not Malays, but the rich-well-placed Malays.
It should be obvious that the attainment of the objective of the second prong of the New Economic Policy to restructure society need not make for social justice, and can in fact, result in the further widening of the gap, not only between the rich and the poor, but between the Malay rich and the Malay poor. This is because all that the restructuring will do is o nurture and foster the growth of a capitalist class among the Malays. The Second Malaysia Plan refers to the creation of an indigenous industrial and commercial community. There can only be a small number of industrialists and commercial magnates, and they can constitute but a small proportion of the total population.
In fact, the second prong objective of the Second Malaysia Plan is being used more and more as an instrument by the Malay rich to exploit and oppress the Malay poor.
I will here give an instance.
The Kuala Sungai Baru, Melaka Affair
In Malacca, 3,300 acres of state land in Kuala Sungai Baru was recently allocated to a Malay company, Syarikat Sri Linggar Sendirian Bhd. to be developed together with another private company into an oil palm estate. This allocation was made against the wishes of the kampong people of Kuala Sungei Baru.
All attempts by the people of Kuala Sungai Baru to make representations and protests to the authorities have been ignored.
The Malays in Kuala Sungai Baru want the land to be used in accodance with the needs of the people and not to allow a handful of politically well-connected people to benefit at the people’s expense.
The kampong people’s idea is to open up the land for the landless in the area, either by way of Felda or Risda development scheme so that the poor farmers and fishermen in the area can directly participate and benefit. Furthermore, the kampong people in Kuala Sungai Baru had long applied for the area to be alienated to them.
Some of the people in Kuala Sungai Baru had sent a memorandum to the Malacca Chief Minister on this matter, and they had been accused by the Malacca Chief Minister, Haji Abdul Ghani Ali, of being “subversive” and “anti-national” and even threatened with arrests under the Internal Security Act.
The Malacca Chief Minister justified the allocation of 3.300 acres of land to Syarikat Sri Lingga on the ground that there is not a single Malay estate in Malacca and to fulfill the NEP objective of achieving 30 per cent bumiputra participation in commerce and industry.
Here is a good illustration of poor Malay peasantry being exploited by a small handful of influential, well-to-do Malays under the pretext of fulfilling the New Economic Policy, to the extent that the poor Malay peasants and fisherman have been accused of betraying the New Economic Policy themselves!
We see here the face of capitalist greed, of the bumiputra variety, which is no different from the non-bumiputra variety, proving the point that capitalist greed, like poverty, transcends race lines.
What is even more unjust is that some 300-600 acres of land in Kampong Sungai Baru had already been promised to be alienated to the kampong people there.
It was on this understanding that the kampong people affected fad felled the land and planted food crops, with knowledge and approval of the local district authorities.
The demand for land reflects aspirations for higher incomes, security of employment, some independence and ownership of an asset to leave to children. To many rural poor, especially older Malays, land ownership is the only known way to satisfy these aspirations.
Economists who have made a study of the subject are of the view that Felda-type of projects, or a modification of it ,are preferable to estates, because of greater employment generation, security of employment, and not least of all, a stake in the country through possession of land. Mature oil palm estates, for instance, employs one worker for 14-16 acres, while Felda has one settler and one household for 10 acres.
In a multi-racial society in Malaysia, development policies should be so formulated as to utilize to the maximum the talents and skills that are inherent in the diverse ethnic and cultural groups. Thus it has been pointed out that while the plantation system may have suited Indian workers in the past, it may not so appeal to the newer generation, or to the Chinese or the Malays.
For generations, the Malays have been able to eke out a living with their own initiative and skills. Their forefathers had been able to turn swamps into productive padi fields and virgin jungles into settlements. The million acres or so of smallholdings developed in the early twenties were carved out of the jungle with the smallholders’ own hands with little outside help. Even today, the settlers on the Kelantan State Land schemes and the early Felda schemes in Melaka, for instance, have given ample proof that this can be done, with no or minimum contract service.
I have no doubt that a large proportion of the kampong people in Kuala Sungai Baru would be prepared to clear and develop now land o their own or with some assistance from the authorities in terms of equipment.
The allocation of the 3,300 acres of land to Syarikat Sri Linggar Sdn Bhd cannot be defended on any ground of social equity, but is a naked manifestation of capitalist exploitation by Malays against Malays. This is further driven home when my investigations showed that the people behind the Sri Linggar projects are men close to the present leadership of the Malacca State government.
This estate project, I submit, is the height of the betrayal of the Malay poor. It is a misapplication of public resources to grant this 3,300 acres and another over a thousand acres in other parts of Malacca for the self-enrichment of a small coterie of well-placed Malay leaders in the state.
Haw Par Securities
The DAP is not opposed to Malay corporate ownership. What we are opposed to is Malay corporate owner ship exploiting and robbing the rights of the Malay masses and condemning them to greater poverty.
Here is an appropriate place for me to caution the Government especially Pernas Securities, to be careful when trying to buy over foreign components of large industries. The Pernas attempt to buy over Haw Par Brothers International, if it had not been blocked by the Singapore Government, would have caused not only Pernas, but also Malaysian taxpayers heavily to the tune of $150 million to $200 million.
Although at that time, many UMNO leaders made fierce calls for retaliatory action against Singapore, I think it is now quite clear, both nationally and internationally, that Pernas and the Malaysian taxpayers have reason to be thankful to Singapore for the blocking of this deal as investigations into the insider dealing and criminal activities of the Haw Par directors showed how close Pernas was being taken for a ride.
A few “Haw Par deals” and it will be the end of Pernas Securities and hundreds of millions of taxpayers’ money.
Between 1971 and the first half of the 1975, the total equity reserved for Bumiputras stood at $704 million. However, actual Bumiputra paid-up capital only amounted to $268 million, leaving $436 million not yet taken up.
According to one estimate, if by 1990, the Malays are to own 30 per cent of the share capital of all joint-stick, public limited companies, as enunciated in the 1970-1990 Outline Perspective plan, then the Malay share must rise from $100 million in 1970 to $14,000 million times what it was in 1970 every years.
I would like to know how the Government could reconcile this objective with the present inability to take up $268 million of shares reserved for bumiputras.
Inflation still too high
Although the Finance Minister said he is gratified by the show-down in the rate of inflation, process continued to rise at levels higher than those experienced in the sixties. Inflation today is still too high for the comfort of the poor and low incomes groups.
The government has not fully exerted itself to curb inflation. For instance, it has not exercised controls over the price and profits actions of import traders and others producers and distributors. Again, there is still no sign of any government intention to introduce anti-trust laws to smash price manipulation.
Surtax should be repealed
It is in this context that we oppose the increase of one per cent surtax, as it is likely to fan further the flames of inflation, and impose greater hardships on the poor. In fact, the DAP want to see the removal of the entire surtax and greater government reliance on direct taxation from the wealthy and the rich.
Income Tax should be overhauled
Although the Finance Minister introduced a few progressive features to the income tax laws and estate duty, it is regrettable that opportunity was not taken to overhaul the entire income tax laws and restructure them to make them more equitable and realistic to the present-day conditions.
The income tax laws were first introduced by the British colonial government in 1974. The personal reliefs granted to an individual should be doubled to take into account the inflationary conditions, as well as reliefs allowable for maintenance of aged parents in keeping with the Asian tradition.
Real Property Gains Tax
The Land Speculation Tax, which is now being replaced, operates where land or buildings are sold of disposed of within two years of its acquisition.
The Real Property Gains Tax, however, slaps a diminishing scale of rates on all property transactions in accordance with the length of the holding period as follows:
-50% if property is disposed of within the first or second year after the date of its acquisition;
-40% within the third year,
-30% within the fourth year,
-20% within the fifth year,
-10% within the sixth year and thereafter.
I am surprised that the Finance Minister, who made so many mention of progressivity in this Budget, did not introduce this element of progressivity to the Real Property Gains Tax, so that over and above a diminishing scale of rates in accordance with the length of the holding there is another increasing scale of rates in accordance with the value of the property disposed of. This would make it more equitable, for the sale of property at higher values would then attract a higher tax. Otherwise, a flat-rate as presently proposed would hit the lower-middle classes hard while it would be a minor matter to the millionaire property owners.
Secondly, $50,000 floor to attract this tax may be a burden on the lower middle class. Thus, a person in Petaling Jaya who presently owns a property of over %50,000 is not a wealthy chap, for his or her property might have may be a mere terrace house which he or she acquired 15 years ago at around $20,000 from 15-yeas of scrimping to pay instalments.
The government should therefore give this matter deeper thought, as to hit this group of Malaysians would not be equitable, and they clearly should be given relief.
I suggest the government consider introducing the progressivity element into the Real Property Gains Tax so that the principle of ability to pay is upheld.
The imposition of further import duties on fresh fruits, especially oranges and apples, must be deplored, especially as they are fruits for the sick. It also appears that the 1976 Chinese New Year would be a gloomy one. I call for the removal of these increase of import duties, failing which, the government should waive total import duties for the import of Mandarin oranges to allow Malaysian Chinese, especially the poorer sections, to celebrate Chinese New Year in accordance with Chinese custom.
War on Poverty
The Treasury Report states that 1976 would be the initial year of the Third Malaysia Plan which will give even greater emphasis to achieving the first prong strategy of the New Economic Policy which is the eradication of poverty regardless of race.
I call on the government to work out a programme whereby within Outline Perspective Plan (1970-1990) the lowest 40 per cent of the Malaysian poor will account for at least 30 per cent of total income.
The present situation where 40 per cent of the households account for about 12% of the total income, while the top one-tenth of all households accounted for nearly 40% of the total income earned in the economy is grossly inequitable and absolutely indefensible.
Such redressal of economic inequality can only succeed with a full-scale war against poverty by the Government, aimed at directly benefitting the poor of all races.
Recently, the Chairman of Gerakan, Dr. Lim Chong Eu, hit out at corporate chauvinism, obviously referring to the MCA plan to establish multi-million dollar business corporations in each Peninsular Malaysian state. There is no doubt that such multi-million dollar corporations can eventually only benefit the rich and well-placed in the MCA by further exploitation of the poor.
What is urgently needed is the government establishment of bodies and authorities with massive injection of public funds to wipe cut poverty in all sectors and fields of human life, of all races. The government must shoulder this responsibility and set the example that it is fully committed to the objective of eradicating poverty regardless of race.
Speech by Ketua Pembangkang and DAP Member of Parliament for Kota Melaka, Mr Lim Kit Siang, in the Dewan Rakyat on Monday, 10th November, 1975 on the 197 Budget