What are the lessons learned from the Asia Financial Crisis?
What went wrong 10 years ago was that our economic fundamentals in the region were very weak. There were huge and rising current account deficits, balance of payment issues, huge foreign debts, low level of foreign reserves.Financial institutions in Asia were weak and not properly regulated. Banks were lending money to cronies of the owners or cronies of those in power, or making all sorts of government-directed policy loans. There was no risk management or assessment whether borrowers had the ability to pay. So the symptoms were all there. The crisis was waiting to happen. It was a question of when, not if.Then the blame game started: It was all because of the speculators, or foreign agents, conspirators, or the Jews. In Malaysia, Dr. Mahathir blamed [billionaire hedge-fund manager] George Soros. Now he embraces Soros, says he wasn't to blame for the crisis. So who was to blame? The government leaders who built the corrupt system or perpetuated it basically were.
What's the situation now?
A lot has changed in Asia since the crisis. In some of the [crisis-hit] countries, the system has been overhauled, new processes have been put in place, regulations have been tightened. But for the most part—and I'm including Malaysia—not much has changed, and it's still business as usual. Have we learnt anything? I don't think so. There's still nepotism, corruption, shady backroom deals with cronies who are amassing wealth.
Are Southeast Asia and Malaysia losing critical foreign investment to China and India?
Singapore is still attracting foreign investments, and it's even smaller than Malaysia. The real reason we aren't attracting foreign investments is the lack of transparency, openness, corporate governance, [as well as the] inefficiencies and rampant corruption. Sure, there are investors who want to go to China and India because of their market size, but there are others who are still setting up in Singapore or Vietnam.Really, whatever investments we're getting in Malaysia are because Southeast Asia is still viewed generally very positively by investors from Europe, North America, and Japan. The key is new investments in new areas that will allow us to move up the value chain. Unfortunately, we aren't getting those. What we need to do is to look at our policies and ask ourselves: What can we do better to make ourselves a better investment destination?
You have called for an end to Malaysia's affirmative-action policies. Isn't that political suicide in a country like yours?
I'm not against helping the poor, the marginalized, or the disadvantaged. But what we need to see is if 37 years later, the policy today is really helping the Malays or bumiputras [indigenous ethinc groups] or has become a license to rob most of the people in the name of affirmative action. Over the years, the policy has become a tool for elite Malays to benefit at the expense of everyone else, including poor and middle-class Malays.The government has created an opaque system behind which it is able to dole out everything to the elite. It's not through competitive bids in a transparent open system. If we still need some affirmative action, it should be through an open, transparent, competitive system.
Where does Malaysia fit in a region dominated by China and India?
There are several issues here, but yes, I believe in this new world where China and India are the rising stars, there will be plenty of niches for us. We need to look at our competitive advantages and build on our expertise, even as we're squeezed out of certain low-end sectors where China, India, and Vietnam clearly have the advantage over us. We're rich in natural resources. We have oil and plantations. We have had big multinationals like Intel (INTC) here for over 30 years.In the late '70s, Malaysia was at par with Taiwan and Korea. Look where are they now. Sure, we have come a long way and the country is better off than it was 30 or 40 years ago, but my point is that we're no longer competing in the same league. It's no use anyone telling me that Malaysia is better off than Somalia or Zimbabwe when were always fighting in a different class.
What's the outlook for the stalled Malaysia-U.S. free-trade agreement?
I'm in favor of free and open trade. The free-trade agreement would have opened doors for our goods and services and brought jobs and benefits for Malaysia. So, yes, I believe we have lost an opportunity.But having said that, there were some issues relating to the services sector, agriculture subsidies, etc., that needed to be looked at and resolved. In any agreement, there's give and take and compromise. I guess if we were serious, the U.S. would have made concessions on some of the issues we were concerned about, just as the U.S. made concessions with South Korea. But really, there's vested interest in Malaysia that didn't want the FTA, and they prevailed. They don't want transparency, open tenders, and so on.
What's next for you?
I'm just going around articulating ideas, meeting people. The government isn't making it easy for me to speak, because we need permits for any kind of political activity and we have been denied permits when I have wanted to speak.I have said I will be candidate in the next election. I think people are listening when I talk about issues like corruption, nepotism, income disparity, freedom, and transparency. These are issues that impact people in their daily lives. It's no longer a development vs. freedom debate. Why can't we have both? Why have just development and no freedom?