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Sunday, January 23, 2011
Julie's Journey: BASILAN BISHOP TO MEET P-NOY
Julie's Journey: BASILAN BISHOP TO MEET P-NOY: "Finally, his call for a heart to heart talk is answered. Basilan Bishop Martin Jumoad is going to meet President Simeon Benigno Aquino II..."
Wednesday, January 19, 2011
The Last King of Tunisia
The Last King of Tunisia
Tunisia's deposed president once swept to power with bold promises of reform. What went wrong?
BEN ALI FAMILY
Country: Tunisia
Lifestyle: There are a number of factors that led to the week of street protests and riots that overwhelmed President Zine el-Abidine Ben Ali's regime in January 2011, including widespread unemployment, rising food prices, and restrictions on civil liberties. But one major source of Tunisians' widespread rage was the conspicuous consumption of Ben Ali's extended family, particularly the relatives of his second wife, Leila Trabelsi. "No, no to the Trabelsis who looted the budget" was a popular chant among the hundreds of mostly young men who took to the streets of the coastal resort of Hammamet -- where the Trabelsis have built a number of opulent beachfront estates -- as they ransacked mansions, burned all-terrain vehicles, and even liberated a horse from its stable.
The opulent lifestyles of Ben Ali's relatives were laid bare in a series of U.S. diplomatic cables released by WikiLeaks, particularly one describing a dinner at the home of his son-in-law, Mohamed Sakhr el-Materi. Materi's Hammamet mansion featured, among other luxuries, "an infinity pool and a terrace of perhaps 50 meters." Roman artifacts, which the host insisted were real, abounded, including a "lion's head from which water pours into the pool." The ambassador and his wife were fed a massive dinner, including more than a dozen dishes and frozen yogurt flown in by plane from Saint-Tropez.
Materi also owned a pet tiger, which he kept in a cage on his compound and consumed four chickens a day. All in all, the situation reminded U.S. Amb. Robert Codec, who had served as an advisor to the transitional government in Iraq and signed the cable, of Uday Hussein's opulent lifestyle.
Not content with buying their own luxuries, Ben Ali's relatives had also taken to appropriating them from others. Another leaked State Department cable describes a 2006 incident in which Imed and Moaz Trabelsi, Ben Ali's nephews through his wife,reportedly stole a $3 million yacht belonging to a prominent French businessman from a dock in Corsica. The yacht reappeared a short time later in a Tunisian port having been repainted to cover its distinguishing characteristics. The French weren't fooled, however, and the yacht was returned to defuse a potential diplomatic uproar. Despite an Interpol warrant being issued for their arrest, the two were never punished.
And how their absence explains the quick fall of Ben Ali's regime.
The reign of Tunisian President Zine el-Abidine Ben Ali is over. His government's response to the steadily growing unrest in the country was marked by successive tactical retreats: On Jan. 12, he declared his intention to immediately do away with restrictions on the press and step down once his term expires in 2014. When that concession only emboldened the protesters further, he responded on Jan. 14 by sacking his government and announcing that new elections would be held in six months. And now, the latest news suggests that the military has stepped in to remove Ben Ali from power and the president has fled the country.
Given the historical ineffectiveness of Arab publics to effect real change in their governments and the Tunisian regime's reputation as perhaps the most repressive police state in the region, the events of the past week are nothing short of remarkable. And while reports and analyses have focused on the extraordinary nature of the protests, it is equally important to consider what has been missing -- namely, Islamists.
Unlike in Egypt, Jordan, Algeria, and most other secular Arab autocracies, the main challenge to the Tunisian regime has not come from Islamist opposition but from secular intellectuals, lawyers, and trade unionists. The absence of a strong Islamist presence is the result of an aggressive attempt by successive Tunisian regimes, dating back over a half-century, to eliminate Islamists from public life. Ben Ali enthusiastically took up this policy in the early 1990s, putting hundreds of members of the al-Nahda party, Tunisia's main Islamist movement, on trial amid widespread allegations of torture and sentencing party leaders to life imprisonment or exile. Most influential Tunisian Islamists now live abroad, while those who remain in Tunisia have been forced to form a coalition with unlikely secular and communist bedfellows.
The nature of the opposition and the willingness of the Tunisian government to back down are not coincidental. If it had been clear that Islamist opposition figures were playing a large role in the current unrest, the government would likely have doubled down on repressive measures. The Tunisian government is rooted in secular Arab nationalist ideology and has long taken its secularism and its nationalism more seriously than its neighbors. Habib Bourguiba, Ben Ali's predecessor and the father of the post-colonial Tunisian state, took over lands belonging to Islamic institutions, folded religious courts into the secular state judicial system, and enacted a secular personal status code upon coming to power.
Bourguiba, like Mustafa Kemal Ataturk in Turkey, viewed Islamists as an existential threat to the very nature of the Tunisian state. He viewed the promotion of secularism as linked to the mission and nature of the state, and because Islamists differed with him on this fundamental political principle, they were not allowed into the political system at all. Bourguiba displayed no desire for compromise on this question, calling for large-scale executions of Islamists following bombings at tourist resorts. He was also often hostile toward Muslim religious traditions, repeatedly referring to the veil in the early years of Tunisian independence as an "odious rag."
Ben Ali, who served as prime minister under Bourguiba, has taken a similarly hard line. Unlike other Arab leaders such as Morocco's King Mohammed VI or Egyptian President Hosni Mubarak, he has been unwilling to adopt any sort of religious title or utilize Islamic imagery to justify his rule. Most importantly, Ben Ali never attempted to co-opt Islamists by controlling their entry into the political system, but instead excluded them entirely from the political dialogue.
This history is vital to understanding why the protests were successful in removing Ben Ali's government. There is an appreciation within the corridors of power in Tunis that the Islamists are not at the top of the pile of the latest unrest. The protesters, though they represent a threat to the political elite's vested interests, have not directly challenged the reigning creed of state secularism.
Ben Ali's fate may have been sealed when military officers -- who had been marginalized by the regime as it lavished money on family members and corrupt business elites -- demonstrated a willingness to stand down and protect protesters from the police and internal security services. However, a military coup would also represent no ideological challenge to the regime -- the state's mission of advancing secular nationalism will continue even after Ben Ali's removal from power. And in the event that the military willingly cedes power and holds new elections in six months, the decimation of the Islamist movement over the last two decades means that any serious challenger is bound to come from a similar ideological background.
The weakness of Tunisia's Islamist opposition also makes it difficult to forecast how other Middle Eastern regimes would react to similar protests. It is unthinkable, for example, that Mubarak would not choose to crack down more viciously on protesters given the very real possibility that, if overthrown, Egypt would become an Islamist state. Given the unique nature of Tunisian society, observers hoping that Ben Ali's fall will portend a similar fate for other Arab autocrats may be left waiting a lot longer than they might now think.
Tuesday, January 18, 2011
Thursday, January 13, 2011
Let us advance the national debate on constitutional reform
The Need to Change The 1987 Constitution x
Chief Justice Reynato S. Puno (Ret.)
UP President Emerlinda Roman,
The Incoming UP President, former Regent Alfredo Pascual
The Honorable Chairperson and Members of
The Board of Regents,
Chancellor Sergio Cao,
Dean Marvic Leonen and
The Faculty of the UP
College of Law and fellow
students of law,
Distinguished guests especially
my colleagues from the
government,
Friends, ladies and gentlemen:
In the last few decades we have witnessed the birth of many “democratic states.” Statistics tell us that in 1914, with the disintegration of the Ottoman and Austro-Hungarian empires there were only 55 honest-to goodness states. Their number jumped to 59 in 1919, to 69 in 1950 and to 90 in 1960. When the Cold War ended, the number of democratic states skyrocketed to an unprecedented height. After the independence of East Timor in 2007, their total number is now 192.1 Some of these democratic states are now classified as failed states. Freedom House categorized most of these new states as only “partly free.”2 In the case of the Philippines, some scholars have started to cast a doubting eye on our capacity to comply with the essential requirements of democracy. As early as 2003,3 they warned against what they call as our “incubus of failure”. They noted our accumulating democratic deficits.
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X Jan. 11, 2011, UP Law Centennial Lecture,
UP, College of Law, Malcolm Hall.
- Rotberg, When States Fail, p. 2.
- Haynes, Developing World, pp. 1-5.
- Rotberg, ibid.
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The observation is far from flattering considering our checkered history of fighting for freedom and our elongated experience as a democratic nation. If we look at Asia’s pantheon of ideas, we will find that Jose Rizal, Marcelo del Pilar, and other Filipinos espoused the ideals of democracy ahead of their cerebral counterparts, Mahatma Gandhi included. Indeed, social scientists regard pre-Spanish Philippines as one of Asia’s early hatching ground of natural rights where the embryo of human dignity was nurtured even by its indigenous people.
It is thus no happenstance, that in Asia, we were among if not the first, to constitutionalize the basic rights of man, rights that were to define democracy. A blast from the past will refresh us. In November 1897, Aguinaldo declared our independence from Spain at Biak-na-Bato and adopted a constitution whose principal features were lifted from Cuba.4 In a month’s time, however, the Pact of Biak-na-Bato was signed and pursuant to its terms, Aguinaldo agreed to surrender, got exiled to Hongkong in exchange for amnesty, an indemnity of Php 1.7 M and the promise of rosy reforms.5 Thus, our first written constitution came to an end before we could savor our freedoms thereunder.
As fate dictated, the United States and Spain came to war and Aguinaldo and company were caught in the middle. Lured by a false sense, Aguinaldo fought side by side with the Americans against Spain. With the defeat of Spain looming as a certainty, Aguinaldo repaired to Kawit, Cavite on June 12, 1898 and boldly read the document entitled “Act of the Proclamation of Independence of the Filipino People,” which ruptured every relationship of the Philippines with Spain. At the foot of the Proclamation, it was curiously stated: witnessed by “the Supreme Judge of the Universe” and protected by “the Mighty and Humane North American Nation.” The new Philippine flag was unfurled and the newly minted national anthem was played. 6
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4 Kramer, The Blood of Government, p.81.
5 Ibid.
6 Ibid., p. 95.
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Aguinaldo’s dream that the “mighty and humane North American Nation” will recognize Philippine independence quickly metamorphosed to a nightmare. The US defeated Spain and declared its sovereignty over the Philippines. Thence on, all efforts of Aguinaldo to preserve the Philippine Republic went down the drain. But to his credit, Aguinaldo did one great act of significance to the development of constitutionalism in our country. He convened the Malolos Congress that drafted a new constitution patterned after the constitutions of Costa Rica, Guatemala, Mexico, Belgium, France and Brazil. It was principally prepared by Felipe Calderon with the sage advice of Cayetano Arellano. The Malolos Constitution was promulgated by Aguinaldo on January 21, 1899. UP historian, Teodoro Agoncillo, hailed the Malolos Constitution “as a great monument to the capacity of the Filipino people to rule themselves in a democratic way, “I quote him:7
xxx The Malolos Constitution was the first important state document that Filipino people, speaking
thru their representatives, ever produced. Democratically oriented, the Congress worked hard to have a Constitution for the people, which was democratic in its aspects. According to this Constitution, the government established was ‘popular, representative and responsible.” It was divided into 3 branches: The executive, the legislative and the judicial. The Constitution also provided for national and individual rights not only of Filipinos, but also of foreigners.xxx The Assembly had only one house… it was unicameral. The President was elected by the Assembly xxx. The department secretaries xxx were responsible not the President but to the Assembly.
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7 Agoncillo, Introduction to Filipino History, pp. 152-153.
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It is worth noting that under the Malolos Constitution, the Assembly was made more powerful than either the executive or the judiciary. Calderon explained why they tilted the balance of power in favor of the Assembly. They were afraid, he said, that if the executive branch became powerful, then the ignorant soldiers who were for Aguinaldo would dominate the government.8
Next, we orbited around the sun of sovereignty of the United States and we have to undergo the whitening of our brown democracy. President Mckinley formed the First Philippine Commission to study how a civil government would be established in our war-ravaged country. In its Report, the Commission stated that the Filipino people wanted above all “a guarantee of those fundamental human rights which Americans hold to be the natural and inalienable birthright of the individual but which under Spanish domination in the Philippines had been shamefully invaded and ruthlessly trampled upon.” Guided by this pious wish, President Mckinley, issued on April 7,1900 his instruction to the Commission that the civil government to be erected in the Philippines must be based on certain “inviolable rules,” by which he meant the Bill of Rights of the US Constitution. Hence, the Philippine Bill of 1902 which temporarily provided for the administration of a civil government in the Philippines carried these “inviolable rules” or Bill of Rights. Likewise, the Philippine Autonomy Act of 1916 or the Jones Law which called, among others, for an autonomous government for the Filipinos, contained these “inviolable rules” or the guarantees of the US Bill of Rights.
In 1934, the Philippine Independence Law or the Tydings-McDuffie Law was enacted. It guaranteed independence to the Philippines and authorized the drafting of a new Constitution for the Philippines. Two sine-qua-non conditions were imposed by the US --- first, the government to be established must be republican in character and second, it should contain a Bill of Rights. The delegates to the 1935 Constitutional Convention were elected and they chose the eminent Claro M. Recto to be its President. They drafted a Constitution that heavily borrowed democratic precepts from the US Constitution. The resulting Constitution was signed on February 19, 1935,
____________________
8 Ibid., p. 153.
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approved by President Roosevelt on March 23, 1935 and ratified by a majority of the Filipino people on May 14, 1935. It served as our fundamental law even after the US granted our independence on July 4, 1946. Notably, it contained an Ordinance which granted US citizens equal rights as the Filipinos in the disposition, exploitation, development and utilization of our natural resources. This economic imposition lasted until July 3, 1974. Despite this economic imposition, the 1995 Constitution served us in good stead in rebuilding our country from the devastation of World War II. It catapulted us as among the leader countries in Asia in the decades of the 50’s and the 60’s.
In the 1970’s, our constitutional journey took an undemocratic detour. Then, President Ferdinand Marcos suspended the writ of habeas corpus and shortly thereafter proclaimed Martial Law, ostensibly to quell a communist rebellion and restore peace and order in the country. President Marcos used his extraordinary commander-in-chief powers even while a Constitutional Convention under the leadership of former President Diosdado Macapagal was in progress revising our 1935 Constitution. President Marcos’ exercise of emergency powers was upheld by the Supreme Court and the 1973 Constitution was ratified under contentious circumstances. The 1973 Constitution totally reorganized government, validated all the martial law decrees of President Marcos and allowed him to govern with unprecedented powers, including legislative powers.
It took years to bring down the authoritarian regime of President Marcos. One explanation for its long life was the Cold War between the US and Russia. Both superpowers unblushingly patronized client-countries even if they were ruled by dictators who showed no compunction butchering the rights of their people so long so they kept their loyalty to either country. The Cold War enabled all types and stripes of dictators to reign all over the world--- in Europe, the America, Africa and Asia, including the Philippines.
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In 1986, the regime of President Marcos came to an end. As is the usual case, it was cut down by a revolution of the people, miraculously a peaceful one. The revolution catapulted Corazon C. Aquino to the Presidency. During a short transition, she governed by means of decrees under a Freedom Constitution. She, however, immediately appointed commissioners to draft a new Constitution in lieu of our 1973 Constitution. The Constitutional Commission was headed by Cecilia Muñoz Palma, a retired Justice of the Supreme Court. Its draft Constitution was approved by the Commission on Oct. 12, 1986, signed on October 19, 1986 and was ratified by the people on the plebiscite held on February 2, 1987. The 1987 Constitution established a more democratic government by, among others, expanding the range of human rights of our people, rebalancing the powers of government, and giving the sovereign people more power to govern directly thru referendum, recall and initiative.
Given the age of the 1987 Constitution, the geopolitical changes going within and without the country, the question is whether there is now a need to reconfigure the Constitution to make it more responsive to the interest of our people. To be sure, the world has radically changed since 1987. The Cold War has been replaced by the war on terror which is eroding some of our civil and political rights. Communism collapsed and the visible hand that guided its economy has been ousted by the invisible hand behind free enterprise. Capitalism has gained a cultic following and is pushing governments to let loose its regulation of private interests. Globalization is resulting in the rise of supra regional arrangement of states like the European Union which is sapping the sovereignty of states. Certainly, these are changes which were not foreseen by our Constitutional Commission. In the home front, we see the defacing of our democratic facade. We have witnessed thru the years, the overt attempts at coup d’ etat by the military, its undemocratic role in regime changes, its unconstitutional coddling by leaders of government; we also saw the sickening deadlocks between the Executive and the Legislative especially in instances when the latter exercised its power to investigate in aid of legislation to crush corruption in government; we saw the raw use or misuse of the political power of impeachment by Congress; we saw the overarching exercise of the power of judicial review even on
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arguable political issues; we saw, the proliferation of political dynasties despite their prohibition; we saw the tightening of the stranglehold by monopolies and oligopolies; we saw the continuing marginalization of the masses by the elite that believe there is constitutional right to be selfish. In short, our declining democracy is not giving the people a responsive and responsible government. Unfortunately, due to impoverished public discussion, all attempts in the past to amend or revise the Constitution to strengthen our democracy have not taken off the ground. It is too tardy in the day to dissect the overt and covert political reasons for these failures but it is never too late to restart efforts to save our Constitution from irrelevance, strengthen our democracy and enable government to meet the felt necessities of our time. There is reason to believe that now is the perfect time to rekindle this thought for we have just elected a new President and inaugurated a new government. There is hardly any doubt about the pristine intention of our new President to make our democracy work for our people and it is our duty to help him succeed. I have been in government in all its branches for about forty years and with no exception, I say that our elected officials, early on their term, wanted to succeed in office and leave a legacy to our people. A lot of them failed, for their good intentions were devoured by a system of government that has been overtaken by time and corrupted by unscrupulous men.
The big question is …… how do we get out of the belly of the whale? My task is merely to provoke debate on the necessity of amending our 1987 Constitution, change some of its dinosaur ideas, improve its institutional mechanisms, all with the end in view of strengthening our democracy and constitutionalism. We need not change the Constitution from root to branches but merely diminish its defects. But we need a modified Constitution to guide our leaders for we cannot allow our leaders to govern by clairvoyance. Let us not be hogtied, let us not to be hobbled by orthodoxies for the first rule in the search for solutions to any problem is to be uncertain of the certain. Let me therefore pinpoint some areas of concern which are shared by others watching our difficult journey to democracy.
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First. Our representative system of government leaves much to be desired because more than 100 years after exercising our right to suffrage, our elections are still not free, fair and honest. This is a proposition that proves itself. It is futile to be blind to the fact that our elections are too expensive; they are often won by force or fraud; they are not issue oriented and they are more popularity contests where an unenlightened electorate usually trumps the enlightened. The result is a Congress, which is the domain of the elites and dynasties, where our Muslim and indigenous brothers are underrepresented. We need to amend the Constitution to give more reality to the political equality of our people, where the vote of each is of equal value with the vote of others. We do not have a representative government for significant sectors of our society are underrepresented or unrepresented in our policy-making institutions like the legislative. We have a synthetic democracy where the system allows our leaders to be elected not by the majority but a mere minority. A hallmark of democracy is rule by the representative of the majority and democratic majority includes not only the who is who and also the who is not in society.
Second. Our democracy is not only tainted by political inequality but also by a worsening social and economic inequality. A pestering social and economic inequality is anti-democratic and anti-republicanism. For they breed people who lack the capacity to exercise effectively their civil and political rights. Democracy is about who makes decisions and it cannot succeed in a setting where sovereignty resides in the many who are not free because they are uninformed. We need no evidence to prove these tearful facts: the eyeball evidence of the millions of Filipinos living below the poverty line stares at us everyday; just follow your nose, and their stench will lead you to their hovels they call homes. At the very least, there is a need to amend our Constitution in order to make some of the basic socio-economic rights of the people, like the right to education and the right to health, demandable from the state in the same manner as our civil and political rights are demandable from the government. Constitutions of countries like South Africa and India have treated these essential socio-economic rights as not merely directional in character but demandable from government for they are considered as requirements of democracy.
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Lack of finances did not deter them and their democracy became more vibrant. Unless we empower the many by improving their economic lot, we will continue to be ruled by a few who reject the ethics that enough is enough.
Third. The Presidential system of government has resulted in gridlock especially when the leaderships of the Executive and legislative departments belong to different political parties. These gridlocks usually prejudice the common good and result in bad governance.
We saw these gridlocks in the past when executive officials refused to obey the summons of Congress exercising its power of investigation in aid of legislation. These refusals shrunk the right of Congress in crafting laws, especially anti-corruption laws. These gridlocks will always stop the wheels of government from working and will not bring about a government that ought to work together for the people. Again, there is need to amend the Constitution to delineate more clearly the demarcation line between executive privilege and the power of the Congress to investigate in aid of legislation and avoid abuse in the use of the executive privilege and equally avoid the misuse the power to investigate. Will the adoption of a parliamentary form of government eliminate these gridlocks in a presidential system of government? Will it result in a more responsive government because the Parliament can be dissolved whenever the ruling party fails the people? Will it eliminate the threats of coup-d’-etat which are destabilizing to democracy? It is time to audit the merit of all of these arguments.
Fourth. We have a Judiciary that is not completely shielded from partisan politics. No ifs and buts about it, our Judiciary lacks financial independence. A judiciary with a bent back and a begging bowl is anathema to real democracy for it will have no backbone to check the excesses of the other branches of government. A Judiciary independent in paper but a pauper in reality is inimical to constitutionalism for it makes easy for unscrupulous politicians to whip judges to join their halleluiah chorus. It is bad enough for the judiciary to be begging Congress every year for a decent budget but it is worse, walking to the DBM on bended knees for the release of an indecent
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budget. This has resulted in the tragedy of the High Court citing the DBM for contempt and the greater tragedy of the Executive thumbing their nose to the High Court despite the citation for contempt. This, to my mind, is an unmitigated tragedy to the rule of law. We compound the problem when poverty drives the Judiciary to rely on the benevolence of foreign funders. Again, let us consider the suggestion that the Constitution should allow a certain irreducible percentage point of the budget for the judiciary and provide for its automatic release.
Fifth. There is need to strengthen the Judiciary by further depoliticizing appointments to the bench. Unless we can remove this virus of partisan politics, molecule by molecule, to disinfectin appointments to our Judiciary, our system of checks and balances will never fully work, again to the detriment of democracy. The Judicial and Bar Council can further diminish its vulnerability to partisan politics. Three of its members --- the Secretary of Justice, the representative of the Senate and the representative of the House --- are carriers of the virus, yet they can be the swing votes on who to include in the short list of nominees to be submitted to the President for appointment to the Judiciary. Even the regular members of the JBC representing the non-partisan stake holders of our justice system are not totally invulnerable to the arrows of partisan politics. They have an achilles heel which is the desire to be reappointed as members of the JBC and this desire needs fulfillment by bowing to political pressure. Again, these political vulnerabilities can be plugged by amending the Constitution and reviewing the composition of the JBC and the manner of appointment of its members.
Sixth. There is need to relieve the High Court of its clogged docket and prevent its packing by the appointing authority. Justice to be of real value to democracy must not only be fair but must be fast for if democracy is boring to the people it is because of justice that travels in the slow lane. It must, above all, be credible. Given the unceasing influx of new cases, the High Court will continuously be burdened with clogged docket, and time constraint is the womb of decisions poor in insight and short in foresight. The possibility of an incumbent President appointing all the members of the High Court during his or her incumbency has come to pass. Right or wrongly, it has raised
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quizzical eyebrows on the independence of the Judiciary. But, however it maybe, no democracy can succeed without a judiciary enjoying the trust of the people. Ours is the task to have a Judiciary without these burdens. One way to declog its docket is to amend the Constitution to delimit the High Court jurisdiction only to significant cases. We must also restrict its power so that it will not have the roving commission to review all acts of government on the ground of “grave abuse of discretion,” a term with an amorphous content. There is no democracy in the world where the Judiciary has been empowered to be the policeman of government. Also, the Constitution should be amended to prevent its packing by any President and thus, avoid the perception that courts are mere instruments and extensions of partisan politics. Again, we cannot afford a Judiciary with a cracked confidence.
Seventh. When representative democracy is not fully functioning, as in our case today, then the means by which the people themselves can exercise direct democracy should be improved. More than any of our Constitutions, the 1987 Constitution placed greater stress on the democratic nature of our state more than the republican character of our government. The Declaration of Principles and State Policies of both the 1935 and 1973 Constitutions simply state: “The Philippines is a republican state xxx.” On the other hand, the 1989 Constitution went further as it states: The Philippines is a democratic and republican State…” It is not hard to understand why the 1987 Constitution described our State first as democratic and then secondly, as republican. It is because our 1987 government was brought about by direct action of the people thru what has become known as the peaceful People Power Revolution of 1986. Consequently, the 1987 Constitution as well as its implementing laws introduced novel mechanisms by which the people can exercise direct democracy, together with the representatives they elected or despite of them, in case they default in effectuating their will and protecting their interest during their governance. Thus, for the first time, under the 1987 Constitution, the people gave themselves the direct power to propose amendments to the Constitution thru the process of initiative. Similarly, our laws now provide for the use of referendum by the people to resolve policy issues and the recall of some elected officials who perform below their expectations. Consistent with the democratic character of our State, the
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powers of the people to direct our government themselves should be expanded. There ought to be more liberal use of the referendum and a bigger coverage of our elected officials who can be recalled and the liberalization of the process of initiative in amending our Constitution. To put too much strictures in the right of our people in the exercise of direct democracy nullifies the spirit of EDSA and will bring us back to the misrule of leaders who betray the interest of the people.
The constraints of time shackle me from fingering other areas of concern. These additional areas are the systemic changes needed to address the unabated violations of human rights, changes to uproot the deep seated corruption in the bureaucracy, changes to make us globally competitive and, changes to provide a more flexible constitutional framework to accommodate the demands of insurgents and separatist groups but without compromising our general interest.
We elect our leaders and it is our duty to provide them a constitutional framework of government where it will be difficult for them to fail the people. I reject the argument that there is no urgency in amending the Constitution to arrest the decline of our democracy. We do not need a democracy in a stretcher. We cannot wait for our democracy to be in the ICU before calling the doctors.
I started by saying, I am only peddling proposals of change in the hope of provoking debates. If I have done anything correct this afternoon, it is to choose the University of the Philippines as the marketplace of discussion of these proposals. It is one venue where the irrelevant is not treated as irreverent, where there is no idea that is considered as inciting to sedition, where we are taught to doubt and to doubt, doubt itself.
Mabuhay ang UP, Mabuhay ang UP College of Law.
Friday, January 7, 2011
EIU - Outlook on Malaysia 2011- 2015 Country Report Malaysia - Main report: January 1st 2011
EIU - Outlook on Malaysia 2011- 2015
Country Report Malaysia - Main report: January 1st 2011
Highlights
- The ruling Barisan Nasional (BN) coalition is expected to maintain its hold on power in the coming five years, securing a victory at the next election.
- The Economist Intelligence Unit expects the BN, which is controlled by its largest component party, the United Malays National Organisation (UMNO), to call an election as early as 2011, two years before its current term ends.
- Fiscal policy will be tightened gradually during the forecast period (2011-15) as the government strives to balance its budget by 2020. Monetary policy will also be tightened as domestic demand strengthens.
- The economy is expected to resume a fairly stable growth path in 2011-15, following a mild recession in 2009 and a strong rebound in 2010. Real GDP growth will average 5% a year in 2011-15.
- The annual rate of inflation is expected to average 3.4% in 2011-15. Government efforts to rationalise the country's extensive subsidy schemes will exert an upward influence on prices.
- Despite the relatively rapid pace of growth in merchandise imports compared with that in exports, Malaysia will continue to run substantial trade and current-account surpluses in 2011-15.
- UMNO announced in November that it had postponed internal party elections for 18 months. The decision intensified speculation that a snap general election could be called in 2011.
- In December federal legislators voted to suspend from parliament Anwar Ibrahim, the de facto head of the opposition Pakatan Rakyat alliance, for six months for misleading the House of Representatives (the lower house).
- The government trimmed sugar and fuel price subsidies further in December. The reduction is part of the government's rationalisation programme, which aims at a gradual reduction of subsidies on a range of goods and services.
- In December the government unveiled the second part of an Economic Transformation Programme that it hopes will transform the country into a high-income nation by 2020.
- The successful initial public offering of a stake in a subsidiary of the state-owned energy company, Petronas, in November has triggered speculation that Petronas itself could be brought to the market in the near future.
- Industrial production growth has remained weak, standing at just 3% year on year in October. The slow rate of expansion has been mainly the result of a decline in mining output.
Outlook for 2011-15: Political stability
Political stability in Malaysia will come under moderate threat during the next five years as the Barisan Nasional (BN) coalition, which is tightly controlled by its largest component party, the United Malays National Organisation (UMNO), faces greater challenges to its grip on power. The March 2008 general election revealed that UMNO could no longer count on the strong support of the majority of Malays. However, the main opposition Pakatan Rakyat (PR) alliance will not be able to offer a sufficiently credible, stable alternative to the BN. Political intrigues within UMNO itself therefore constitute the biggest threat to political stability in Malaysia.
Since March 2008 the ability to make or break the BN has been in the hands of political parties from Sabah and Sarawak. BN legislators from the two states, which are located on the island of Borneo, number 52, thus making up over one-third of the BN's total of 137 members of parliament (MPs). The BN’s Borneo power base is likely to be severely tested at the Sarawak state elections, which must be held by July 2011. Unresolved issues, such as illegal foreign immigration to Sabah, may cause the BN parties based in Borneo, or individual MPs from the island, to defect to the opposition or use the threat to do so to secure greater influence within the coalition in the run-up to the next general election. Moreover, the Borneo-based parties will become even more influential if MPs from the island retain their seats at the next election and a substantial number of BN legislators based in peninsular Malaysia lose theirs.
Although voters in the rural heartland of peninsular Malaysia continue to support UMNO, a significant number of better-educated, liberal middle-class Malays have deserted the ruling party in favour of the opposition. This shift in support away from UMNO could be further encouraged by the greater availability of uncensored information on Internet news sites and blogs. Given the Malaysian government's heavy censorship of the print media and broadcast services, the Internet will continue to be the main arena for the exposure of alleged government corruption and the political intrigues of individual MPs. Some conservative Malays have also voiced concerns over the government's plan to reform policies that favour bumiputera (ethnic Malays and other indigenous peoples), believing that the special rights accorded to them in the constitution may be rescinded.
UMNO's internal leadership elections, which have been postponed until 2012, could be a source of instability, particularly if the party fails to secure a resounding victory in the snap general election that may well be called in 2011. Under such circumstances there would be even greater resistance to economic reforms, undermining the credibility of the prime minister, Najib Razak, and potentially placing his position as president of UMNO—and hence his role as head of government—at risk. The most likely contender to become UMNO's next leader is the deputy prime minister, Muhyiddin Yassin.
The leader of the PR, Anwar Ibrahim, a former deputy prime minister, is likely to be convicted on a charge of sodomy in the coming months. Mr Anwar claims that the case against him is politically motivated. Without him, the ties that unite the disparate parties making up the PR—the reformist, multicultural Parti Keadilan Rakyat (PKR), the conservative, Islamist Parti Islam se-Malaysia (PAS) and the left-of-centre, predominantly ethnic-Chinese Democratic Action Party (DAP)—are likely to fray, while the process of choosing a new PR spokesman could deepen divisions within Mr Anwar's PKR party and also between the opposition coalition's members. Yet the likely sentencing of Mr Anwar to a prison term could also facilitate a realignment of the opposition and elements of the BN, thus offering an alternative to the current political groupings.
Since March 2008 the ability to make or break the BN has been in the hands of political parties from Sabah and Sarawak. BN legislators from the two states, which are located on the island of Borneo, number 52, thus making up over one-third of the BN's total of 137 members of parliament (MPs). The BN’s Borneo power base is likely to be severely tested at the Sarawak state elections, which must be held by July 2011. Unresolved issues, such as illegal foreign immigration to Sabah, may cause the BN parties based in Borneo, or individual MPs from the island, to defect to the opposition or use the threat to do so to secure greater influence within the coalition in the run-up to the next general election. Moreover, the Borneo-based parties will become even more influential if MPs from the island retain their seats at the next election and a substantial number of BN legislators based in peninsular Malaysia lose theirs.
Although voters in the rural heartland of peninsular Malaysia continue to support UMNO, a significant number of better-educated, liberal middle-class Malays have deserted the ruling party in favour of the opposition. This shift in support away from UMNO could be further encouraged by the greater availability of uncensored information on Internet news sites and blogs. Given the Malaysian government's heavy censorship of the print media and broadcast services, the Internet will continue to be the main arena for the exposure of alleged government corruption and the political intrigues of individual MPs. Some conservative Malays have also voiced concerns over the government's plan to reform policies that favour bumiputera (ethnic Malays and other indigenous peoples), believing that the special rights accorded to them in the constitution may be rescinded.
UMNO's internal leadership elections, which have been postponed until 2012, could be a source of instability, particularly if the party fails to secure a resounding victory in the snap general election that may well be called in 2011. Under such circumstances there would be even greater resistance to economic reforms, undermining the credibility of the prime minister, Najib Razak, and potentially placing his position as president of UMNO—and hence his role as head of government—at risk. The most likely contender to become UMNO's next leader is the deputy prime minister, Muhyiddin Yassin.
The leader of the PR, Anwar Ibrahim, a former deputy prime minister, is likely to be convicted on a charge of sodomy in the coming months. Mr Anwar claims that the case against him is politically motivated. Without him, the ties that unite the disparate parties making up the PR—the reformist, multicultural Parti Keadilan Rakyat (PKR), the conservative, Islamist Parti Islam se-Malaysia (PAS) and the left-of-centre, predominantly ethnic-Chinese Democratic Action Party (DAP)—are likely to fray, while the process of choosing a new PR spokesman could deepen divisions within Mr Anwar's PKR party and also between the opposition coalition's members. Yet the likely sentencing of Mr Anwar to a prison term could also facilitate a realignment of the opposition and elements of the BN, thus offering an alternative to the current political groupings.
Outlook for 2011-15: Election watch
A general election has to be held every five years, and the next one must take place before April 2013. However, the Economist Intelligence Unit believes that a poll will be held sooner. Traditionally, the BN has preferred to call elections about a year before the end of its term of office, and this makes early 2012 a possible date for the next election. However, developments in recent months, such as the postponement of internal UMNO elections, suggest that BN may consider holding a snap poll in 2011. We still believe that Mr Najib will set a general election date after the Sarawak state election, which must be held by July 2011 and is the main event on the political calendar before the next national poll. The results of the Sarawak election will provide a good indication of the level of public support for the government and its reform plans. Recent by-elections suggest that the electorate—and especially non-Malay voters—have become much more volatile. The results of two by-elections in November 2010 point to a slight shift in non-Malay sentiment in favour of the BN, suggesting that the government's plans to reform policies favouring bumiputera has increased its appeal among ethnic minorities.
Outlook for 2011-15: International relations
Under the leadership of the previous prime minister, Abdullah Badawi, and that of Mr Najib, economic links with Singapore have become closer, and we expect economic ties to strengthen further in the next five years. There is no longer constant bickering over minor issues, although a degree of racially tinged wariness persists. Solutions to outstanding disagreements—especially over water supplied to Singapore by Malaysia—are likely to be reached in the forecast period (2011-15). China will become an increasingly important trading partner in the next five years. The Malaysian government's apprehensiveness about China's rise and growing economic influence is mixed with ambivalence towards ethnic Chinese among its own population and a need to attract investment. As Malaysia's economic dependence on China grows, uneasiness in Malaysia about Chinese power in South-east Asia is expected to increase.
Outlook for 2011-15: Policy trends
The policy agenda during the forecast period will be centred on a host of initiatives aimed at raising income levels and achieving the government's goal of turning Malaysia into a high-income nation by 2020. Under the Government Transformation Programme, the BN has outlined six "national key result areas", which include tackling corruption, improving education and upgrading basic rural infrastructure. In addition, a recently unveiled Economic Transformation Programme identifies eight strategic reform initiatives, including reinvigorating private investment, and 12 national key economic areas (NKEAs) that are to be prioritised. The government considers the NKEAs, which include tourism and palm oil cultivation, to be the sectors with the greatest potential to boost overall economic growth. The Tenth Malaysia Plan (10MP), a medium-term spending plan for 2011 15, will support the implementation of these programmes. Specific issues on the reform agenda for the next few years include the phasing out of price controls and subsidies, in a process that is widely considered to be necessary to create a competitive domestic economy. The government will also push ahead with changes to the bumiputera positive-discrimination policies. It has already relaxed a requirement that obliged companies to offer minority equity stakes to bumiputera. It hopes that further reforms will attract greater inflows of foreign direct investment, as it believes that such investment has the potential to be a major engine of growth in the next five years. However, the government is unlikely to dismantle affirmative-action policies altogether for fear of alienating its Malay support base.
Outlook for 2011-15: Fiscal policy
The government will make only slow progress in bringing its finances close to balance during the next five years. In its budget plans for 2011 the government is targeting a deficit equivalent to 5.4% of GDP. This would represent only a small improvement compared with the government's estimate of a shortfall of 5.6% of GDP in 2010. We expect the government to be fairly successful in adhering to its budget plans for 2011, which feature an increase in spending of 2.8% compared with estimated total expenditure in 2010. Although it will rein in subsidies, the government will continue to spend heavily on supplies and services in 2011. Debt-servicing costs will also rise and are expected to account for around 10% of total operating expenditure in 2011. The budget is forecast to remain in deficit in 2012-15. However, assuming that the government reduces operating expenditure and has some success in increasing revenue by expanding the tax base, the deficit will shrink to an average of 4.3% of GDP during that period. A widening of the tax base is expected to be achieved through the introduction of a goods and services tax (GST), although implementation of the tax is likely to be hampered by opposition from households and businesses. Further moves to alter the subsidy structure could also prove unpopular.
Outlook for 2011-15: Monetary policy
Bank Negara Malaysia (BNM, the central bank) is expected to continue to make incremental changes to its main interest rate, the overnight policy rate (OPR), during the early part of the forecast period as it proceeds with the normalisation of monetary policy. BNM has raised the OPR three times since March 2010, by a total of 75 basis points, bringing the rate up to 2.75%, after having cut it to a record low in response to the dramatic downturn in the Malaysian economy that occurred in 2009. However, the recent sharp appreciation of the local currency, the ringgit, and signs of slower economic growth suggest that further rises in official interest rates in the next few months are unlikely. BMN does not expect inflation to rise to problematic levels, believing that it will remain moderate in 2011 as strengthening domestic demand is accompanied by only a gradual acceleration in the rate of price increases. In 2011 we do not expect the OPR to exceed the high of 3.5% at which it stood during 2007 and much of 2008. But a quickening in the pace of domestic demand growth from 2012 will prompt BNM to raise the OPR above this level during the remainder of the forecast period to contain inflationary pressures.
Outlook for 2011-15: International assumptions
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |
| Economic growth (%) | ||||||
| US GDP | 2.7 | 2.2 | 2.1 | 2.3 | 2.2 | 2.5 |
| OECD GDP | 2.7 | 1.8 | 2.0 | 2.2 | 2.2 | 2.1 |
| World GDP | 3.6 | 2.7 | 2.9 | 3.0 | 3.0 | 3.1 |
| World trade | 12.4 | 5.9 | 6.3 | 6.7 | 6.7 | 6.3 |
| Inflation indicators (%) | ||||||
| US CPI | 1.5 | 1.0 | 1.9 | 2.5 | 2.8 | 2.8 |
| OECD CPI | 1.3 | 1.1 | 1.7 | 2.0 | 2.1 | 2.3 |
| Manufactures (measured in US$) | 3.2 | 0.7 | 0.2 | 1.8 | 1.2 | 1.8 |
| Oil (Brent; US$/b) | 80.0 | 82.0 | 81.3 | 78.3 | 75.5 | 71.0 |
| Non-oil commodities (measured in US$) | 23.2 | 9.5 | -4.4 | -4.0 | 1.5 | 0.1 |
| Financial variables | ||||||
| US$ 3-month commercial paper rate (av; %) | 0.2 | 0.3 | 0.7 | 2.2 | 4.1 | 5.1 |
| ¥ 3-month money market rate (av; %) | 0.2 | 0.3 | 0.9 | 1.3 | 1.9 | 2.3 |
| Exchange rate ¥:US$ (av) | 88.0 | 82.4 | 82.4 | 81.0 | 82.1 | 83.5 |
| Exchange rate M$:US$ (av) | 3.22 | 3.03 | 2.98 | 2.95 | 2.92 | 2.89 |
Outlook for 2011-15: Economic growth
The Malaysian economy is expected to move on to a more stable growth path in 2011-15, when we expect real GDP growth to average 5% a year. This follows a period of instability, during which the economy contracted by 1.7% in 2009 amid the global economic downturn before rebounding to estimated growth of 6.8% in 2010. The economy expanded by an average of 9.5% year on year in the first half of 2010, but data for the third quarter point to a marked slowdown in the rate of GDP growth, and this trend is estimated to have continued in the fourth quarter. The strong economic recovery in 2010 has largely reflected a new phase in the inventory cycle, as the dramatic drawdown of stocks that occurred in 2009 amid the global recession has been followed by restocking. The impressive rebound has also been partly owing to the low year-earlier base of comparison. In 2011-15 private consumption and investment will remain the primary drivers of growth. An increase in compulsory savings on the part of employees from January 1st 2011 will eat into private disposable incomes, but growth in private consumption will continue to be underpinned by a fairly strong labour market. The positive effect of restocking on real GDP growth is expected to wane from 2011 as the process of inventory accumulation moderates. Despite the government's efforts to consolidate its finances, public spending (which will be guided by the 10MP) will continue to account for around 14% of GDP. Exports of goods and services are expected to grow by an average of 8.2% a year in 2011-15. However, the contribution of net exports to GDP growth will be marginal, owing to the fact that imports of goods and services will record similar growth rates.
In supply-side terms, the services sector will be the largest and most dynamic part of the economy, as the government channels more resources into the sector in its bid to ensure that Malaysia becomes a high-income nation by 2020. The industrial sector will continue to constitute a sizeable part of the economy, but we expect it to remain smaller than the services sector during the forecast period. Growth in the industrial sector will generally track the rate of expansion in the economy as a whole. The most dynamic services subsectors will be financial services, wholesale trade, and hotels and restaurants. Growth in financial services will be encouraged by gradual liberalisation. This will help to improve the international competitiveness of Malaysia's financial system, especially in Islamic-finance products, and will make it more responsive to the financing needs of both the private and public sectors. The contribution of agriculture, and especially palm oil production, to the overall economy will be important; agricultural growth will help to raise rural incomes and consumption during the forecast period.
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In supply-side terms, the services sector will be the largest and most dynamic part of the economy, as the government channels more resources into the sector in its bid to ensure that Malaysia becomes a high-income nation by 2020. The industrial sector will continue to constitute a sizeable part of the economy, but we expect it to remain smaller than the services sector during the forecast period. Growth in the industrial sector will generally track the rate of expansion in the economy as a whole. The most dynamic services subsectors will be financial services, wholesale trade, and hotels and restaurants. Growth in financial services will be encouraged by gradual liberalisation. This will help to improve the international competitiveness of Malaysia's financial system, especially in Islamic-finance products, and will make it more responsive to the financing needs of both the private and public sectors. The contribution of agriculture, and especially palm oil production, to the overall economy will be important; agricultural growth will help to raise rural incomes and consumption during the forecast period.
| Economic growth | ||||||
| % | 2010a | 2011b | 2012b | 2013b | 2014b | 2015b |
| GDP | 6.8 | 4.3 | 4.8 | 5.1 | 5.4 | 5.6 |
| Private consumption | 6.8 | 5.6 | 5.8 | 5.7 | 5.9 | 5.5 |
| Government consumption | -1.4 | 3.1 | 3.7 | 4.2 | 3.9 | 3.3 |
| Gross fixed investment | 10.1 | 5.6 | 6.1 | 6.8 | 7.0 | 7.2 |
| Exports of goods & services | 11.2 | 6.6 | 8.2 | 8.4 | 8.7 | 9.0 |
| Imports of goods & services | 15.5 | 6.8 | 9.2 | 9.2 | 9.4 | 9.3 |
| Domestic demand | 10.7 | 4.2 | 5.6 | 5.7 | 5.8 | 5.6 |
| Agriculture | 3.8 | 2.3 | 2.5 | 2.6 | 2.8 | 2.5 |
| Industry | 7.9 | 4.0 | 4.2 | 4.4 | 4.5 | 4.5 |
| Services | 6.4 | 4.8 | 5.6 | 5.9 | 6.2 | 6.6 |
| a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. | ||||||
Outlook for 2011-15: Inflation
Annual inflation will average 3.4% in 2011-15. Government efforts to rationalise the country's extensive subsidy scheme will exert upward pressure on prices in the forecast period. An inflationary risk will also be posed by the new GST, which the government will attempt to introduce in the early part of the period. But disinflationary influences will be strong. The removal of trade barriers and greater regional economic integration will help to maintain a low-inflation environment. As a nation that is heavily dependent on international trade, Malaysia will not be able to escape the effects of growing competition and import penetration, especially in the form of a wide range of consumer goods from China. Another factor that will help to keep inflation in check will be the forecast appreciation of the ringgit against the US dollar in 2011-15: as most imports and exports are denominated in US dollars, imports will consequently become cheaper.
Outlook for 2011-15: Exchange rates
The ringgit has strengthened markedly against the US dollar in recent months, rising to M$3.12:US$1 in mid-November, and we estimate the currency's average rate of appreciation in 2010 at nearly 10%. The ringgit, like several other Asian currencies, has seen its value driven up in recent months, mainly by surging inflows of capital, although it is also being supported by large surpluses on the trade and current accounts. A positive interest-rate differential with the US will persist in the early part of the forecast period, and this will continue to provide support to the ringgit. We therefore expect the exchange rate to remain strong, standing an annual average of M$2.89:US$1 in 2015. BNM has not come under heavy pressure to impose capital controls in order to contain the ringgit's appreciation, and the central bank will maintain its current exchange-rate regime, whereby which the ringgit is subject to a managed float against a trade-weighted basket of currencies. BNM will continue to stress that it does not attempt to maintain the ringgit at a particular level and intervenes only to minimise volatility and prevent currency misalignments. Offshore trading of the ringgit is prohibited under a rule that was imposed in the wake of the 1997-98 Asian financial crisis. However, further progress towards regional economic integration makes it likely that BNM will relax this policy in the latter part of the forecast period to allow the ringgit to be traded offshore.
Outlook for 2011-15: External sector
In the next five years Malaysia will continue to post large current-account surpluses, which will be equivalent to 12.2% of GDP on average. Growth in exports will be underpinned by a recovery in external demand and stronger regional trade. An improvement in external conditions is expected to boost demand in Malaysia for imports of intermediate goods used in the manufacture of exports. Import growth will also be supported by firm domestic demand. However, as exports far exceed imports in absolute terms, the expected faster rate of growth in imports will not make a significant dent in the trade surplus.
Malaysia will broaden its export range, but the economy will remain highly sensitive to the global electronic-goods cycle. Levels of non-manufactured exports, consisting largely of agricultural commodities (notably palm oil) and minerals (particularly crude petroleum and liquefied natural gas, or LNG), will also continue to be determined by global economic conditions. In addition, there will be a shift in the balance of export destinations and import suppliers in 2011-15. China will remain the fastest-growing economy in the Asia region, creating many opportunities for Malaysia (and particularly for its ethnic-Chinese minority). As a result, China is likely to overtake Singapore to become Malaysia's largest export market during the forecast period, while trade with the US, the EU and Japan will decline in relative importance.
Malaysia will broaden its export range, but the economy will remain highly sensitive to the global electronic-goods cycle. Levels of non-manufactured exports, consisting largely of agricultural commodities (notably palm oil) and minerals (particularly crude petroleum and liquefied natural gas, or LNG), will also continue to be determined by global economic conditions. In addition, there will be a shift in the balance of export destinations and import suppliers in 2011-15. China will remain the fastest-growing economy in the Asia region, creating many opportunities for Malaysia (and particularly for its ethnic-Chinese minority). As a result, China is likely to overtake Singapore to become Malaysia's largest export market during the forecast period, while trade with the US, the EU and Japan will decline in relative importance.
Outlook for 2011-15: Forecast summary
| Forecast summary | ||||||
| (% unless otherwise indicated) | ||||||
| 2010a | 2011b | 2012b | 2013b | 2014b | 2015b | |
| Real GDP growth | 6.8 | 4.3 | 4.8 | 5.1 | 5.4 | 5.6 |
| Industrial production growth | 6.9 | 4.3 | 5.2 | 5.0 | 5.7 | 5.5 |
| Gross agricultural production growth | 3.8 | 2.3 | 2.5 | 2.6 | 2.8 | 2.5 |
| Unemployment rate (av) | 3.5 | 3.3 | 3.2 | 3.2 | 3.1 | 2.8 |
| Consumer price inflation (av) | 1.8 | 2.7 | 3.2 | 3.4 | 3.8 | 3.9 |
| Consumer price inflation (end-period) | 2.0 | 3.2 | 3.7 | 3.7 | 3.4 | 3.8 |
| Base lending rate | 5.1 | 5.6 | 6.0 | 6.1 | 6.4 | 6.4 |
| Central government balance (% of GDP) | -5.6 | -5.4 | -4.7 | -4.6 | -4.0 | -3.9 |
| Exports of goods fob (US$ bn) | 189.5 | 213.0 | 229.0 | 251.7 | 280.0 | 304.0 |
| Imports of goods fob (US$ bn) | -146.2 | -161.9 | -181.0 | -200.5 | -219.2 | -235.9 |
| Current-account balance (US$ bn) | 29.4 | 36.2 | 32.6 | 35.6 | 45.2 | 53.7 |
| Current-account balance (% of GDP) | 12.5 | 13.3 | 11.0 | 10.9 | 12.5 | 13.2 |
| External debt (end-period; US$ bn) | 62.0 | 64.6 | 68.0 | 72.3 | 75.7 | 78.8 |
| Exchange rate M$:US$ (av) | 3.22 | 3.03 | 2.98 | 2.95 | 2.92 | 2.89 |
| Exchange rate M$:US$ (end-period) | 3.14 | 3.02 | 3.00 | 2.93 | 2.94 | 2.91 |
| Exchange rate M$:¥100 (av) | 3.66 | 3.67 | 3.62 | 3.64 | 3.55 | 3.46 |
| Exchange rate M$:€ (end-period) | 4.19 | 3.62 | 3.57 | 3.43 | 3.42 | 3.42 |
| a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. | ||||||
The political scene: Rumours persist regarding a possible snap election in 2011
Speculation has intensified that the prime minister, Najib Razak, is planning to call a general election in the first half of 2011, nearly two years ahead of schedule. This view is based in part on the likelihood that the confidence of the ruling Barisan Nasional (BN) has been boosted by victories in two recent by-elections, one in peninsular Malaysia and the other in Sabah, which may have marked a turning point in terms of voter support for the governing coalition. Adding further fuel to the rumours about an imminent election, at the end of November the BN’s largest component party, the United Malays National Organisation (UMNO), announced that it was postponing its branch, divisional and central leadership elections by 18 months. Mr Najib, who is UMNO's president, said that the party's supreme council would focus on strengthening the organisation and did not want to run the risk that party elections might lead to damaging internal conflicts. Mr Najib has denied he is planning an early parliamentary poll, but twice in the past when UMNO has postponed its supreme council elections a general election has then been held within a year. Recent speculation has focused on a possible election in March or April.
Having witnessed the splits that have arisen in the main opposition Parti Keadilan Rakyat (PKR) as a result of its internal elections in November, UMNO is probably keen to avoid any kind of internal party contest that could harm its public profile. Election to party posts in Malaysia, and particularly to positions in the parties making up the ruling BN, can pave the way to lucrative and influential positions in government. Another possible reason behind UMNO's decision to postpone internal elections is the party's desire to minimise the risk of defections to the opposition—an option that is likely to be considered by disappointed candidates for UMNO party posts. Since the March 2008 general election, Anwar Ibrahim, the de facto leader of the opposition Pakatan Rakyat (PR) alliance, has attempted to increase the PR's representation in parliament by encouraging BN lawmakers to defect.
Having witnessed the splits that have arisen in the main opposition Parti Keadilan Rakyat (PKR) as a result of its internal elections in November, UMNO is probably keen to avoid any kind of internal party contest that could harm its public profile. Election to party posts in Malaysia, and particularly to positions in the parties making up the ruling BN, can pave the way to lucrative and influential positions in government. Another possible reason behind UMNO's decision to postpone internal elections is the party's desire to minimise the risk of defections to the opposition—an option that is likely to be considered by disappointed candidates for UMNO party posts. Since the March 2008 general election, Anwar Ibrahim, the de facto leader of the opposition Pakatan Rakyat (PR) alliance, has attempted to increase the PR's representation in parliament by encouraging BN lawmakers to defect.
The political scene: The ruling coalition unveils its new charter
The ruling coalition held a conference in early December at which it launched a new BN charter and logo based on Mr Najib’s racially inclusive "1Malaysia" concept. Prior to this, the BN’s supreme council had approved changes to its constitution allowing direct membership for individuals who are not affiliated to a component party. The changes also allow non-affiliated members of parliament (MPs), such as defectors from the PKR, to join the BN. The decision appears be an attempt by Mr Najib to bypass the BN’s rigid, racially based party structure. During the conference, Mr Najib, who holds the post of BN president, launched a ferocious attack on the PR and Mr Anwar, accusing them of planning to destroy the country. He also promised that a general election would be held soon and said that the BN would rule for another 50 years.
At the conference Chua Soi Lek, the president of the BN’s second-largest party, the Malaysian Chinese Alliance (MCA), angered many UMNO members with an impassioned and frank speech in which he said that certain words and phrases, such as "immigrant", "squatter" and "Malay supremacy", should be made taboo as they are currently used in a derogatory way against the local ethnic-Chinese and Indian populations. He said that there should not be a "big brother, small brother" attitude within the BN—a reference to the unequal treatment of UMNO's allies within coalition. Mr Chua also expressed disapproval of the fact that some national policy decisions are made at UMNO supreme council meetings rather than by the cabinet. He was supported by politicians from the BN's smaller Chinese party, Gerakan. The MCA leader appeared to be more in tune with the PKR than with UMNO. His complaints were a reminder that, in spite of all the talk of 1Malaysia and a "new BN", the country's Chinese and Indian minorities continue to feel discriminated against.
At the conference Chua Soi Lek, the president of the BN’s second-largest party, the Malaysian Chinese Alliance (MCA), angered many UMNO members with an impassioned and frank speech in which he said that certain words and phrases, such as "immigrant", "squatter" and "Malay supremacy", should be made taboo as they are currently used in a derogatory way against the local ethnic-Chinese and Indian populations. He said that there should not be a "big brother, small brother" attitude within the BN—a reference to the unequal treatment of UMNO's allies within coalition. Mr Chua also expressed disapproval of the fact that some national policy decisions are made at UMNO supreme council meetings rather than by the cabinet. He was supported by politicians from the BN's smaller Chinese party, Gerakan. The MCA leader appeared to be more in tune with the PKR than with UMNO. His complaints were a reminder that, in spite of all the talk of 1Malaysia and a "new BN", the country's Chinese and Indian minorities continue to feel discriminated against.
The political scene: The PKR holds its conference in November
The opposition PKR held its first party conference under its newly elected leadership on November 27th. During the preceding week a contender for the position of deputy party president, a former government minister, Zaid Ibrahim, resigned from the PKR in protest against the party's failure to address the issue of vote-rigging in its internal elections. Mr Zaid had also questioned Mr Anwar’s de facto leadership, and his departure removed from the party the opposition leader's strongest critic. The PKR president, Wan Azizah Ismail, who is Mr Anwar’s wife, admitted that mistakes had been made but claimed that on balance the party elections had been a positive experience. In her conference speech, Mrs Azizah called for the abolition of the concept of Malay supremacy, which she claimed had been used by UMNO to deceive the Malay population, to enrich itself and to keep itself in power. She emphasised the PKR’s multiracial character, contrasting it with UMNO’s strong Malay focus. The PKR’s explicit rejection of Malay supremacy, and the suggestion that, should the PR gain power, an ethnic-Chinese politician could become deputy prime minister, was heavily criticised by conservative Malay politicians and the Malay press: Mrs Azizah and her husband were called traitors who rejected the federal constitution, and were accused of trying to divert attention away from the problems besetting the PKR and Mr Anwar.
Meanwhile, there are signs that Mr Anwar’s sodomy trial may be drawing to a close, with his conviction the likely outcome. In November Mr Anwar's defence lawyers applied to have the presiding judge, Mohd Zabidin, disqualified on grounds of bias. The claim related to a row between Justice Mohd and Mr Anwar's lead counsel over the defence's attempts to obtain information relating to the trial. In what appeared to be a strange arrangement, the application for the judge's disqualification was made to Justice Mohd himself, who has the authority to rule on this point. The application, the second of its kind made by the defence team, was rejected in December. Later in that month Malaysia's legislators decided to suspend Mr Anwar from parliament for six months for misleading the body. Mr Anwar has claimed that Mr Najib’s 1Malaysia concept, drafted by a US-based public-relations firm, Apco, had been copied from a concept originating in Israel—an allegation that federal lawmakers decided was untrue. It is unclear whether members of parliament objected specifically to the implication of a link to Israel–a sensitive political issue, as Malaysia does not have diplomatic relations with that country—or that they disliked the suggestion that the 1Malaysia concept was copied from a similar programme in Israel. (One Israel was the name adopted by an alliance of political parties taking part in the 1999 parliamentary election in the Middle Eastern country.)
Meanwhile, there are signs that Mr Anwar’s sodomy trial may be drawing to a close, with his conviction the likely outcome. In November Mr Anwar's defence lawyers applied to have the presiding judge, Mohd Zabidin, disqualified on grounds of bias. The claim related to a row between Justice Mohd and Mr Anwar's lead counsel over the defence's attempts to obtain information relating to the trial. In what appeared to be a strange arrangement, the application for the judge's disqualification was made to Justice Mohd himself, who has the authority to rule on this point. The application, the second of its kind made by the defence team, was rejected in December. Later in that month Malaysia's legislators decided to suspend Mr Anwar from parliament for six months for misleading the body. Mr Anwar has claimed that Mr Najib’s 1Malaysia concept, drafted by a US-based public-relations firm, Apco, had been copied from a concept originating in Israel—an allegation that federal lawmakers decided was untrue. It is unclear whether members of parliament objected specifically to the implication of a link to Israel–a sensitive political issue, as Malaysia does not have diplomatic relations with that country—or that they disliked the suggestion that the 1Malaysia concept was copied from a similar programme in Israel. (One Israel was the name adopted by an alliance of political parties taking part in the 1999 parliamentary election in the Middle Eastern country.)
The political scene: Democracy index: Malaysia
Public confidence in political parties has declined
The Economist Intelligence Unit's 2010 democracy index ranks Malaysia 71st out of 167 countries. This represents a slight deterioration compared with the 2008 index, in which Malaysia was ranked 68th. The deterioration partly reflects a gradual erosion of civil liberties and political culture in the past year or so. A lack of public confidence in the junior partners within the Barisan Nasional (BN) governing coalition, and especially those representing ethnic minorities, persists. Voter confidence in political parties has been further undermined by an increase in politicking by members of the opposition Pakatan Rakyat alliance as well as by figures in the BN. Such activity is expected to increase as members of parliament make preparations for a possible early general election in 2011. Malaysia continues to score fairly well in the electoral process and pluralism category. Elections are generally free, and voters are not subject to serious intimidation. The transfer of power is orderly between the leaders of the United Malays National Organisation, which continues to dominate the political scene and has been part of every coalition government since independence.
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Restrictions on civil liberties remain a concern
Problems relating to the media persist in Malaysia, with the print and broadcast media being subject to censorship. Although the government has pledged not to interfere in electronic media, in the past year or so charges have been filed with increasing frequency against anti-government authors. Malaysia also scores relatively poorly in the civil liberties category of the index, mainly because of the Internal Security Act (ISA), which allows indefinite detention without trial and has been used against opposition politicians and journalists. The opposition has pledged to dismantle the ISA if it comes to power, but the current government appears keen to keep it intact. Malaysia continues to operate a dual judicial system whereby secular law is applied alongside sharia law; all matters pertaining to Islam are referred to the sharia courts.
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Democracy index 2010: Democracy in retreat, a free white paper containing the full index and detailed methodology, can be downloaded fromwww.eiu.com/
Note on methodology
There is no consensus on how to measure democracy, and definitions of democracy are contested. Having free and fair competitive elections, and satisfying related aspects of political freedom, is the sine qua non of all definitions. However, our index is based on the view that measures of democracy which reflect the state of political freedom and civil liberties are not "thick" enough: they do not encompass sufficiently some crucial features that determine the quality and substance of democracy. Thus, our index also includes measures of political participation, political culture and functioning of government, which are, at best, marginalised by other measures.
Our index of democracy covers 167 countries and territories. The index, on a 0-10 scale, is based on the ratings for 60 indicators grouped in five categories: electoral process and pluralism; civil liberties; functioning of government; political participation; and political culture. The five categories are interrelated and form a coherent conceptual whole. Each category has a rating on a 0-10 scale, and the overall index of democracy is the simple average of the five category indices.
The category indices are based on the sum of the indicator scores in the category, converted to a 0-10 scale. Adjustments to the category scores are made if countries fall short in the following critical areas for democracy:
The Economist Intelligence Unit's 2010 democracy index ranks Malaysia 71st out of 167 countries. This represents a slight deterioration compared with the 2008 index, in which Malaysia was ranked 68th. The deterioration partly reflects a gradual erosion of civil liberties and political culture in the past year or so. A lack of public confidence in the junior partners within the Barisan Nasional (BN) governing coalition, and especially those representing ethnic minorities, persists. Voter confidence in political parties has been further undermined by an increase in politicking by members of the opposition Pakatan Rakyat alliance as well as by figures in the BN. Such activity is expected to increase as members of parliament make preparations for a possible early general election in 2011. Malaysia continues to score fairly well in the electoral process and pluralism category. Elections are generally free, and voters are not subject to serious intimidation. The transfer of power is orderly between the leaders of the United Malays National Organisation, which continues to dominate the political scene and has been part of every coalition government since independence.
| Democracy index | |||
| Regime type | Overall score | Overall rank | |
| 2010 | Flawed democracy | 6.19 out of 10 | 71 out of 167 |
| 2008 | Flawed democracy | 6.36 out of 10 | 68 out of 167 |
Restrictions on civil liberties remain a concern
Problems relating to the media persist in Malaysia, with the print and broadcast media being subject to censorship. Although the government has pledged not to interfere in electronic media, in the past year or so charges have been filed with increasing frequency against anti-government authors. Malaysia also scores relatively poorly in the civil liberties category of the index, mainly because of the Internal Security Act (ISA), which allows indefinite detention without trial and has been used against opposition politicians and journalists. The opposition has pledged to dismantle the ISA if it comes to power, but the current government appears keen to keep it intact. Malaysia continues to operate a dual judicial system whereby secular law is applied alongside sharia law; all matters pertaining to Islam are referred to the sharia courts.
| Democracy index 2010 by category | ||||
| (on a scale of 0-10) | ||||
| Electoral process | Functioning of government | Political participation | Political culture | Civil liberties |
| 6.50 | 6.79 | 5.56 | 6.25 | 5.88 |
Democracy index 2010: Democracy in retreat, a free white paper containing the full index and detailed methodology, can be downloaded fromwww.eiu.com/
Note on methodology
There is no consensus on how to measure democracy, and definitions of democracy are contested. Having free and fair competitive elections, and satisfying related aspects of political freedom, is the sine qua non of all definitions. However, our index is based on the view that measures of democracy which reflect the state of political freedom and civil liberties are not "thick" enough: they do not encompass sufficiently some crucial features that determine the quality and substance of democracy. Thus, our index also includes measures of political participation, political culture and functioning of government, which are, at best, marginalised by other measures.
Our index of democracy covers 167 countries and territories. The index, on a 0-10 scale, is based on the ratings for 60 indicators grouped in five categories: electoral process and pluralism; civil liberties; functioning of government; political participation; and political culture. The five categories are interrelated and form a coherent conceptual whole. Each category has a rating on a 0-10 scale, and the overall index of democracy is the simple average of the five category indices.
The category indices are based on the sum of the indicator scores in the category, converted to a 0-10 scale. Adjustments to the category scores are made if countries fall short in the following critical areas for democracy:
- whether national elections are free and fair;
- the security of voters;
- the influence of foreign powers on government; and
- the capability of the civil service to implement policies.
- full democracies—scores of 8 to 10;
- flawed democracies—score of 6 to 7.9;
- hybrid regimes—scores of 4 to 5.9;
- authoritarian regimes—scores below 4.
Economic policy: The government presses ahead with subsidy rationalisation
On December 3rd the government announced small increases in prices for fuel and sugar. The cheaper grade of petrol, RON95, went up in price by 5 sen (1.6 US cents) to M$1.90 (59 US cents) per litre, while similar increases lifted the price of diesel to M$1.80/litre and that of liquefied petroleum gas (LPG) to M$1.90/litre. The more expensive grade of petrol, RON97, rose by 15 sen/litre to M$2.30/litre. The price of a kilogram of sugar was increased by 20 sen, to M$2.10. The increases are part of the government’s subsidy rationalisation programme, and the changes implemented so far, together with further rises planned for 2011, are expected to shave M$1.2bn (US$370m) off additional government expenditure between December 2010 and December 2011. Idris Jala, the minister who heads the government's Performance Management and Delivery Unit (Pemandu), has said that even after the increases prices for fuel in Malaysia remain lower than in neighbouring countries. Fuel prices are gradually being raised to market-determined levels in order to reduce the subsidy bill, and the latest increase was the third to have been implemented in 2010.
Economic policy: Investors snap up shares in state-owned companies
Malaysia’s programme of privatisations and initial public offerings (IPOs) is continuing at a steady pace. On November 12th the national oil producer, Petronas, raised M$12.8bn when it sold a 31% stake in a subsidiary, Petronas Chemicals. The subsidiary encompasses 22 companies that produce industrial and specialist chemicals and fertiliser. The IPO set a record for South-east Asia and made Petronas Chemicals one of the ten largest stocks by market capitalisation on Malaysia's main stock exchange, Bursa Malaysia. When trading in the shares opened two weeks later, the price jumped by nearly 10%. The success of the offering reflected the unique credentials of Petronas Chemicals, which has a firm foothold in Asia (from which it derives 97% of its revenue) and benefits from its highly rated parent company. In October another Petronas subsidiary, Malaysia Marine and Heavy Engineering, raised M$2bn in an IPO. Petronas itself is regularly mentioned as a candidate for a listing, and it is thought that an IPO by the company could raise more than M$30bn. However, there appear to be no concrete plans for such a share offering. The recent listings form part of a policy to promote a structural shift in the economy away from the public sector towards the private sector, as laid out in the Economic Transformation Programme (ETP).
The pace of privatisations and IPOs is likely to be stepped up considerably if the recommendations of the National Economic Advisory Council (NEAC, a government agency) that are included in the second part of the New Economic Model (NEM) are fully adopted. (The NEM outlines reforms and a deregulation agenda that the government believes will enable Malaysia to achieve high-income status by 2020.) The NEAC argues that the government should not hold large stakes in non-strategic companies unless they are part of a liquid trading portfolio. It has also advised the government to privatise all non-strategic government-linked companies (GLCs) and to reduce to 30% its equity stakes in strategic GLCs, such as those involved in electricity generation, telecommunications, postal services, civil aviation, airports and public transport. According to the council, the majority of GLCs have become too big, have strayed beyond their mandates and are crowding out private businesses. It is also widely believed such enterprises receive preferential treatment from the government. The activities of the GLCs are a grey area: the NEAC admitted that there were significantly more than the 445 corporations that it had identified, covering a wide spectrum of business activities. The council recommended a full audit of all such companies and the creating of a transparent GLC Oversight Authority under the auspices of the Prime Minister’s Department, which would publish annual reports and ensure that GLCs adhere to their original mandates.
The NEAC also recommended the creation of a second sovereign wealth fund using the proceeds from the sale of stakes in GLCs, with any profits made by the fund to be used to encourage new private-sector initiatives. It said that, unlike the existing sovereign wealth fund, Khazanah Nasional, which is run by the Ministry of Finance, the new fund should not be under direct government control and should be accountable and transparent.
Full implementation of the NEAC's proposals would mean a radical change in Malaysia’s industrial policy, an objective that is likely to be beyond the government’s capabilities. Mr Najib, who is sympathetic to the council's proposals, has declared that a divestment strategy is underway and will be gradually implemented. However, there are concerns that GLCs will continue to receive preferential treatment from the government and that they will be awarded contracts for projects outlined in the ETP, many of which will not be subject to competitive tendering. The NEAC's recommendations for the GLCs are probably the most important proposals in the second part of the NEM, which was published on December 3rd, three months after it was delivered to the prime minister. The first part of the NEM was unveiled on March 30th and aroused strong opposition from conservative Malay groups opposed to economic liberalisation, which claim that deregulation and liberalisation threaten Malays' constitutional rights and privileges. There is no reference to the possibility of entirely scrapping the long-standing policy aim of increasing the bumiputera share of national wealth to 30% (from a tiny 2.4% in the 1970s), but the NEM pays much attention to the market distortions and inefficiencies resulting from affirmative-action policies.
The pace of privatisations and IPOs is likely to be stepped up considerably if the recommendations of the National Economic Advisory Council (NEAC, a government agency) that are included in the second part of the New Economic Model (NEM) are fully adopted. (The NEM outlines reforms and a deregulation agenda that the government believes will enable Malaysia to achieve high-income status by 2020.) The NEAC argues that the government should not hold large stakes in non-strategic companies unless they are part of a liquid trading portfolio. It has also advised the government to privatise all non-strategic government-linked companies (GLCs) and to reduce to 30% its equity stakes in strategic GLCs, such as those involved in electricity generation, telecommunications, postal services, civil aviation, airports and public transport. According to the council, the majority of GLCs have become too big, have strayed beyond their mandates and are crowding out private businesses. It is also widely believed such enterprises receive preferential treatment from the government. The activities of the GLCs are a grey area: the NEAC admitted that there were significantly more than the 445 corporations that it had identified, covering a wide spectrum of business activities. The council recommended a full audit of all such companies and the creating of a transparent GLC Oversight Authority under the auspices of the Prime Minister’s Department, which would publish annual reports and ensure that GLCs adhere to their original mandates.
The NEAC also recommended the creation of a second sovereign wealth fund using the proceeds from the sale of stakes in GLCs, with any profits made by the fund to be used to encourage new private-sector initiatives. It said that, unlike the existing sovereign wealth fund, Khazanah Nasional, which is run by the Ministry of Finance, the new fund should not be under direct government control and should be accountable and transparent.
Full implementation of the NEAC's proposals would mean a radical change in Malaysia’s industrial policy, an objective that is likely to be beyond the government’s capabilities. Mr Najib, who is sympathetic to the council's proposals, has declared that a divestment strategy is underway and will be gradually implemented. However, there are concerns that GLCs will continue to receive preferential treatment from the government and that they will be awarded contracts for projects outlined in the ETP, many of which will not be subject to competitive tendering. The NEAC's recommendations for the GLCs are probably the most important proposals in the second part of the NEM, which was published on December 3rd, three months after it was delivered to the prime minister. The first part of the NEM was unveiled on March 30th and aroused strong opposition from conservative Malay groups opposed to economic liberalisation, which claim that deregulation and liberalisation threaten Malays' constitutional rights and privileges. There is no reference to the possibility of entirely scrapping the long-standing policy aim of increasing the bumiputera share of national wealth to 30% (from a tiny 2.4% in the 1970s), but the NEM pays much attention to the market distortions and inefficiencies resulting from affirmative-action policies.
Economic performance: Growth in industrial production slows further
Growth in industrial production on a year-on-year basis continued to lose momentum in October. The slowdown partly reflected the high base of comparison in the year-earlier period. As in previous months, in October the mining sector performed poorly, with output falling by 1.1% year on year as a 5.5% increase in natural-gas production was offset by a 3.9% fall in crude oil production. The rate of output growth in the manufacturing sector slowed from 7.6% year on year in September to 4.5% in October, the lowest rate recorded since November 2009. Manufacturing accounts for 63.5% of the industrial production index, which also includes mining (30.6%) and electricity (5.9%). Unsurprisingly, the index showed sluggish growth of only 3% year on year in October, down from 5.6% in September. Manufacturing companies have warned in business surveys that production growth and new orders have weakened in recent months and that they expect falls in production and export sales in the coming period.
Export revenue growth stood at only 1.3% year on year in October, despite strong global commodity prices. In terms of unit values, palm oil was up by 16.6% year on year, LNG by 12.5% and crude oil by 2.7%. Electronic and electrical products were still Malaysia’s largest export revenue earner, with a share of 40% of total exports, but shipments declined by 5.9% year on year. Merchandise imports, meanwhile, were relatively strong in October, rising by 12.4% year on year (representing only a slight deceleration from the previous month’s gain of 14.6%), with the value of intermediate goods imports surging by 15.1%. On a quarterly basis the value of merchandise exports has remained broadly unchanged since the fourth quarter of 2009. By contrast, the value of imports has continued to rise since the first quarter of 2010, reflecting restocking and firm domestic demand.
Export revenue growth stood at only 1.3% year on year in October, despite strong global commodity prices. In terms of unit values, palm oil was up by 16.6% year on year, LNG by 12.5% and crude oil by 2.7%. Electronic and electrical products were still Malaysia’s largest export revenue earner, with a share of 40% of total exports, but shipments declined by 5.9% year on year. Merchandise imports, meanwhile, were relatively strong in October, rising by 12.4% year on year (representing only a slight deceleration from the previous month’s gain of 14.6%), with the value of intermediate goods imports surging by 15.1%. On a quarterly basis the value of merchandise exports has remained broadly unchanged since the fourth quarter of 2009. By contrast, the value of imports has continued to rise since the first quarter of 2010, reflecting restocking and firm domestic demand.
Economic performance: Lending to businesses picks up pace
Bank lending remained strong in October. Total outstanding loans increased by 12.4% year on year in October, following a rise of 11.9% in September. Loans to households rose by 13.3% year on year, slightly down compared with growth of 13.4% in September, while loans to non-households were up by 11.3%. Competition between commercial banks resulted in a decline in the average lending rate to 4.99% in October, from 5.19% in September; the rate bottomed out in December 2009, at 4.83%. The strongest competition in the sector is for household loans and loans to small- and medium-sized enterprises. Given that Bank Negara Malaysia (the central bank) has recently tightened restrictions on household loans, new growth will have to come from lending to businesses. Demand for business loans in 2010 has been largely for working capital rather than expansion.
Economic performance: Palm oil prices soar
The price of palm oil recently reached a 30-month high on the Bursa Derivatives Exchange. On December 13th crude palm oil for delivery in February 2011 closed at M$3,722 (around US$1,150) per tonne. Malaysia is one of the world's largest producers of palm oil. Industry analysts expect further sharp price increases, possibly to above M$4,000, during the first quarter of 2011. Malaysian palm oil production was hit by dry weather conditions earlier in 2010, and heavy rainfall in November, resulting in prolonged soil saturation, is likely to have a negative impact on crop yields. International factors are pushing up prices for palm oil and its alternatives. Indonesia, the world’s largest producer of palm oil, has also experienced inclement weather. Low stocks of palm oil, coupled with sustained strong demand from India and China, the world’s largest purchasers of the commodity, are likely to underpin strong prices in the months ahead. Crude palm oil production in Malaysia stood at 1.45m tonnes in November, down by 8.6% year on year.
Data and charts: Annual data and forecast
| 2006a | 2007a | 2008a | 2009a | 2010b | 2011c | 2012c | |
| GDP | |||||||
| Nominal GDP (US$ m) | 156.6 | 186.8 | 222.3 | 192.8 | 235.2 | 271.1 | 296.6 |
| Nominal GDP (M$ bn) | 574.4 | 642.0 | 740.9 | 679.7 | 756.7 | 820.1 | 884.5 |
| Real GDP growth (%) | 5.8 | 6.5 | 4.7 | -1.7 | 6.8 | 4.3 | 4.8 |
| Expenditure on GDP (% real change) | |||||||
| Private consumption | 6.8 | 10.5 | 8.5 | 0.7 | 6.8 | 5.6 | 5.8 |
| Government consumption | 5.0 | 6.6 | 10.7 | 3.1 | -1.4 | 3.1 | 3.7 |
| Gross fixed investment | 7.5 | 9.4 | 0.7 | -5.6 | 10.1 | 5.6 | 6.1 |
| Exports of goods & services | 6.6 | 4.1 | 1.6 | -10.4 | 11.2 | 6.6 | 8.2 |
| Imports of goods & services | 8.1 | 5.9 | 2.2 | -12.3 | 15.5 | 6.8 | 9.2 |
| Origin of GDP (% real change) | |||||||
| Agriculture | 5.2 | 1.3 | 4.3 | 0.4 | 3.8 | 2.3 | 2.5 |
| Industry | 4.5 | 3.0 | 0.7 | -7.0 | 7.9 | 4.0 | 4.2 |
| Services | 7.5 | 10.3 | 7.5 | 2.6 | 6.4 | 4.8 | 5.6 |
| Population and income | |||||||
| Population (m) | 26.8 | 27.2 | 27.5 | 27.9 | 28.3 | 28.6 | 29.0 |
| GDP per head (US$ at PPP) | 12,274 | 13,276 | 14,024b | 13,731b | 14,564 | 15,257 | 16,129 |
| Fiscal indicators (% of GDP) | |||||||
| Public-sector balance | -3.3 | -3.2 | -4.8 | -7.0 | -5.6 | -5.4 | -4.7 |
| Public-sector debt interest payments | 2.2 | 2.0 | 1.7 | 2.1 | 2.4 | 2.7 | 2.8 |
| Public-sector primary balance | -1.2 | -1.2 | -3.1 | -4.9 | -3.1 | -2.8 | -1.9 |
| Net public debt | 42.2 | 41.5 | 41.4 | 53.3 | 52.9 | 54.7 | 55.7 |
| Prices and financial indicators | |||||||
| Exchange rate M$:US$ (end-period) | 3.53 | 3.31 | 3.46 | 3.42 | 3.14 | 3.02 | 3.00 |
| Consumer prices (end-period; % change) | 3.1 | 2.4 | 4.4 | 1.1 | 2.0 | 3.2 | 3.7 |
| Producer prices (av; % change) | 6.7 | 5.5 | 10.2 | -7.3 | 5.1 | 4.4 | 5.7 |
| Stock of money M1 (% change) | 13.8 | 19.8 | 8.2 | 9.9 | 9.8 | 11.1 | 10.3 |
| Stock of money M2 (% change) | 16.6 | 11.0 | 13.3 | 9.5 | 8.6 | 10.5 | 14.2 |
| Lending interest rate (end-period; %) | 6.6 | 6.3 | 5.9 | 4.8 | 5.1 | 5.6 | 6.0 |
| Current account (US$ m) | |||||||
| Trade balance | 37,441 | 37,727 | 51,261 | 40,254 | 43,265 | 51,095 | 47,970 |
| Goods: exports fob | 160,916 | 176,220 | 199,733 | 157,655 | 189,496 | 213,008 | 228,996 |
| Goods: imports fob | -123,474 | -138,493 | -148,472 | -117,402 | -146,231 | -161,913 | -181,026 |
| Services balance | -1,970 | 794 | 51 | 1,297 | -689 | -390 | -1,106 |
| Income balance | -4,712 | -4,082 | -7,137 | -4,169 | -6,831 | -7,506 | -6,907 |
| Current transfers balance | -4,560 | -4,668 | -5,262 | -5,580 | -6,335 | -7,031 | -7,395 |
| Current-account balance | 26,200 | 29,770 | 38,914 | 31,801 | 29,411 | 36,167 | 32,561 |
| External debt (US$ m) | |||||||
| Debt stock | 55,026 | 61,567 | 66,182 | 58,311b | 62,000 | 64,565 | 67,976 |
| Debt service paid | 7,630 | 10,436 | 8,772 | 11,506b | 10,875 | 9,447 | 8,042 |
| Principal repayments | 5,269 | 7,818 | 6,258 | 9,629b | 8,828 | 7,381 | 6,157 |
| Interest | 2,362 | 2,618 | 2,515 | 1,877b | 2,047 | 2,066 | 1,885 |
| Debt service due | 7,630 | 10,436 | 8,772 | 11,506b | 10,875 | 9,447 | 8,042 |
| International reserves (US$ m) | |||||||
| Total international reserves | 82,426 | 101,313 | 91,528 | 96,713 | 100,051 | 107,895 | 119,416 |
| a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts. | |||||||
| Source: IMF, International Financial Statistics. | |||||||
Data and charts: Quarterly data
| 2008 | 2009 | 2010 | ||||||
| 4 Qtr | 1 Qtr | 2 Qtr | 3 Qtr | 4 Qtr | 1 Qtr | 2 Qtr | 3 Qtr | |
| Federal government finance (M$ m) | ||||||||
| Revenue | 46,300 | 35,857 | 39,380 | 40,813 | 42,589 | 28,734 | 41,973 | 43,128 |
| Expenditure | 64,513 | 42,516 | 51,434 | 48,588 | 63,525 | 38,917 | 49,072 | 50,931 |
| Current balance | -18,212 | -6,659 | -12,054 | -7,775 | -20,936 | -10,183 | -7,099 | -7,803 |
| Output | ||||||||
| GDP at constant 2000 prices (M$ m) | 131,611 | 121,660 | 127,256 | 134,717 | 137,463 | 133,890 | 138,520 | 141,895 |
| GDP at constant 2000 prices (% change, year on year) | 0.1 | -6.2 | -3.9 | -1.2 | 4.4 | 10.1 | 8.9 | 5.3 |
| Industrial production index (2000=100) | 101.5 | 94.6 | 97.3 | 103.1 | 104.0 | 105.1 | 108.1 | 107.4 |
| Industrial production index (% change, year on year) | -8.8 | -14.6 | -10.8 | -7.0 | 2.4 | 11.1 | 11.1 | 4.2 |
| Prices | ||||||||
| Consumer prices (2005=100) | 113.0 | 111.8 | 111.7 | 112.1 | 112.8 | 113.2 | 113.5 | 114.3 |
| Consumer prices (% change, year on year) | 5.9 | 3.7 | 1.3 | -2.3 | -0.2 | 1.3 | 1.6 | 1.9 |
| Producer prices (2000=100) | 118.2 | 113.3 | 113.6 | 114.6 | 118.3 | 120.5 | 120.7 | n/a |
| Producer prices (% change, year on year) | 0.9 | -6.7 | -11.1 | -10.9 | 0.0 | 6.4 | 6.2 | n/a |
| Financial indicators | ||||||||
| Exchange rate M$:US$ (av) | 3.55 | 3.63 | 3.55 | 3.52 | 3.40 | 3.37 | 3.24 | 3.16 |
| Exchange rate M$:US$ (end-period) | 3.46 | 3.65 | 3.52 | 3.47 | 3.42 | 3.27 | 3.26 | 3.09 |
| Deposit rate (av; %) | 3.0 | 2.0 | 2.1 | 2.0 | 2.0 | 2.3 | 2.5 | 2.7 |
| Lending rate (av; %) | 5.9 | 5.2 | 5.0 | 4.9 | 4.8 | 5.0 | 5.1 | 5.2 |
| Money market rate (av; %) | 3.6 | 2.5 | 2.1 | 2.2 | 2.2 | 2.3 | 2.7 | 2.9 |
| M1 (end-period; M$ bn) | 182.8 | 179.7 | 185.6 | 191.4 | 200.9 | 201.2 | 209.0 | 213.4 |
| M1 (% change, year on year) | 8.2 | 3.5 | 5.5 | 6.6 | 9.9 | 12.0 | 12.6 | 11.5 |
| M2 (end-period; M$ bn) | 903.2 | 921.8 | 922.6 | 950.4 | 989.3 | 1,002.8 | 1,007.3 | 1,028.8 |
| M2 (% change, year on year) | 13.3 | 9.3 | 6.3 | 7.6 | 9.5 | 8.8 | 9.2 | 8.3 |
| KLSE composite index (end-period; Apr 4th1986=100) | 876.8 | 872.6 | 1,075.2 | 1,202.1 | 1,272.8 | 1,320.6 | 1,314.0 | 1,463.5 |
| KLSE composite index (% change, year on year) | -42.1 | -38.9 | -16.0 | 17.4 | 46.8 | 68.6 | 32.1 | 37.0 |
| Sectoral trends | ||||||||
| Electronic & electrical products index (2000=100) | 93.0 | 71.3 | 77.6 | 89.4 | 94.6 | 97.0 | 101.2 | 97.8 |
| Electronic & electrical products index (% change, year on year) | -22.5 | -35.4 | -31.0 | -22.6 | 1.8 | 36.0 | 30.4 | 9.4 |
| Mining index (2000=100) | 98.6 | 96.0 | 93.3 | 95.2 | 95.2 | 96.7 | 93.8 | 92.9 |
| Mining index (% change, year on year) | -4.6 | -6.1 | -3.2 | -4.2 | -3.4 | 0.7 | 0.6 | -2.4 |
| Foreign trade (M$ m) | ||||||||
| Exports fob | 149,145 | 121,398 | 129,097 | 143,805 | 158,995 | 158,707 | 157,126 | 158,753 |
| Imports cif | 118,358 | 88,686 | 102,574 | 117,132 | 126,549 | 119,777 | 133,699 | 136,413 |
| Trade balance | 30,787 | 32,713 | 26,524 | 26,673 | 32,446 | 38,930 | 23,426 | 22,340 |
| Foreign payments | ||||||||
| Current-account balance (M$ m) | 29,644 | 31,295 | 27,981 | 25,448 | 27,416 | 30,449 | 16,240 | n/a |
| Reserves excl gold (end-period; US$ m) | 91,149 | 87,434 | 91,154 | 94,810 | 95,432 | 94,003 | 93,336 | 99,205 |
| Source: IMF, International Financial Statistics. | ||||||||
Data and charts: Monthly data
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | |
| Exchange rate M$:US$ (av) | ||||||||||||
| 2008 | 3.27 | 3.22 | 3.19 | 3.16 | 3.22 | 3.26 | 3.25 | 3.33 | 3.44 | 3.52 | 3.59 | 3.55 |
| 2009 | 3.57 | 3.64 | 3.67 | 3.61 | 3.52 | 3.52 | 3.55 | 3.52 | 3.50 | 3.40 | 3.39 | 3.41 |
| 2010 | 3.38 | 3.42 | 3.33 | 3.21 | 3.25 | 3.26 | 3.21 | 3.15 | 3.11 | 3.10 | 3.12 | n/a |
| Exchange rate M$:US$ (end-period) | ||||||||||||
| 2008 | 3.24 | 3.19 | 3.19 | 3.16 | 3.24 | 3.27 | 3.26 | 3.39 | 3.46 | 3.56 | 3.62 | 3.46 |
| 2009 | 3.61 | 3.69 | 3.65 | 3.56 | 3.51 | 3.52 | 3.52 | 3.52 | 3.47 | 3.41 | 3.39 | 3.42 |
| 2010 | 3.41 | 3.41 | 3.27 | 3.19 | 3.25 | 3.26 | 3.19 | 3.14 | 3.09 | 3.11 | 3.16 | n/a |
| Real effective exchange rate (2000=100; CPI basis) | ||||||||||||
| 2008 | 82.08 | 82.49 | 81.75 | 82.09 | 81.20 | 82.80 | 82.94 | 82.75 | 81.51 | 82.26 | 81.25 | 80.95 |
| 2009 | 80.84 | 80.93 | 80.73 | 80.70 | 80.66 | 79.63 | 78.52 | 78.32 | 78.23 | 79.63 | 79.61 | 79.50 |
| 2010 | 80.49 | 80.24 | 82.24 | 85.20 | 85.33 | 85.49 | 85.43 | 85.89 | 86.15 | n/a | n/a | n/a |
| Money market rate (av; %) | ||||||||||||
| 2008 | 3.6 | n/a | n/a | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 |
| 2009 | 2.9 | 2.6 | 2.1 | 2.1 | 2.1 | 2.1 | 2.2 | 2.2 | 2.2 | 2.2 | 2.2 | 2.2 |
| 2010 | 2.2 | 2.2 | 2.5 | 2.6 | 2.7 | 2.8 | 2.9 | n/a | 3.0 | 3.0 | n/a | n/a |
| Money supply M1 (end-period; % change, year on year) | ||||||||||||
| 2008 | 21.8 | 15.5 | 20.0 | 15.6 | 13.9 | 17.8 | 15.1 | 13.1 | 14.9 | 8.6 | 11.1 | 8.2 |
| 2009 | 4.7 | 3.9 | 3.5 | 7.4 | 9.3 | 5.5 | 6.0 | 7.8 | 6.6 | 10.6 | 13.6 | 9.9 |
| 2010 | 10.7 | 15.3 | 12.0 | 8.9 | 11.2 | 12.6 | 10.7 | 13.9 | 11.5 | n/a | n/a | n/a |
| Money supply M2 (end-period; % change, year on year) | ||||||||||||
| 2008 | 12.8 | 10.5 | 11.8 | 14.4 | 13.7 | 15.7 | 16.1 | 14.7 | 15.6 | 13.3 | 14.4 | 13.3 |
| 2009 | 10.7 | 9.5 | 9.3 | 6.6 | 5.4 | 6.3 | 5.9 | 8.4 | 7.6 | 9.7 | 10.4 | 9.5 |
| 2010 | 8.2 | 8.4 | 8.8 | 8.5 | 9.6 | 9.2 | 8.3 | 8.2 | 8.3 | n/a | n/a | n/a |
| Industrial production (% change, year on year) | ||||||||||||
| 2008 | 9.7 | 9.9 | 3.0 | 4.6 | 2.4 | 2.3 | 4.8 | 1.8 | -1.0 | -2.7 | -7.6 | -15.8 |
| 2009 | -18.0 | -12.7 | -13.0 | -11.8 | -11.0 | -9.7 | -7.9 | -6.9 | -6.1 | 0.8 | -0.8 | 7.5 |
| 2010 | 13.8 | 4.9 | 14.2 | 11.6 | 12.4 | 9.3 | 3.4 | 3.8 | 5.6 | n/a | n/a | n/a |
| KLSE composite index (end-period; Apr 4th 1986=100) | ||||||||||||
| 2008 | 1,393 | 1,357 | 1,248 | 1,280 | 1,276 | 1,187 | 1,163 | 1,101 | 1,019 | 864 | 866 | 877 |
| 2009 | 884 | 891 | 873 | 991 | 1,044 | 1,075 | 1,175 | 1,171 | 1,202 | 1,243 | 1,259 | 1,273 |
| 2010 | 1,259 | 1,271 | 1,321 | 1,346 | 1,285 | 1,314 | 1,361 | 1,422 | 1,464 | 1,506 | 1,485 | n/a |
| Consumer prices (av; % change, year on year) | ||||||||||||
| 2008 | 2.3 | 2.7 | 2.8 | 3.0 | 3.8 | 7.7 | 8.5 | 8.5 | 8.2 | 7.6 | 5.7 | 4.4 |
| 2009 | 3.9 | 3.7 | 3.5 | 3.0 | 2.4 | -1.4 | -2.4 | -2.4 | -2.0 | -1.5 | -0.1 | 1.1 |
| 2010 | 1.3 | 1.2 | 1.3 | 1.5 | 1.6 | 1.7 | 1.9 | 2.1 | 1.8 | 2.0 | n/a | n/a |
| Producer prices (av; % change, year on year) | ||||||||||||
| 2008 | 10.5 | 12.0 | 12.9 | 13.7 | 14.0 | 16.9 | 16.1 | 14.0 | 10.7 | 4.8 | 0.7 | -2.6 |
| 2009 | -4.0 | -7.0 | -9.2 | -9.6 | -11.0 | -12.5 | -13.0 | -9.9 | -9.8 | -3.3 | 0.0 | 3.6 |
| 2010 | 4.2 | 5.9 | 9.0 | 7.4 | 5.9 | 5.2 | 5.6 | 4.8 | n/a | n/a | n/a | n/a |
| Total exports fob (M$ m) | ||||||||||||
| 2008 | 53,181 | 47,266 | 51,801 | 55,743 | 61,171 | 58,439 | 63,472 | 59,972 | 62,825 | 52,823 | 51,309 | 45,013 |
| 2009 | 38,270 | 39,557 | 43,572 | 41,105 | 42,919 | 45,074 | 48,824 | 47,786 | 47,196 | 54,256 | 50,066 | 54,673 |
| 2010 | 52,447 | 46,840 | 59,420 | 52,016 | 52,281 | 52,830 | 55,427 | 52,852 | 50,475 | 54,980 | n/a | n/a |
| Total imports cif (M$ m) | ||||||||||||
| 2008 | 43,209 | 37,903 | 43,613 | 43,231 | 45,404 | 45,102 | 48,728 | 46,857 | 47,401 | 43,709 | 40,212 | 34,437 |
| 2009 | 30,161 | 27,499 | 31,026 | 33,717 | 32,905 | 35,952 | 40,980 | 38,229 | 37,923 | 42,788 | 41,186 | 42,575 |
| 2010 | 39,516 | 35,169 | 45,093 | 42,761 | 44,153 | 46,786 | 48,414 | 44,532 | 43,467 | 48,130 | n/a | n/a |
| Trade balance fob-cif (M$ m) | ||||||||||||
| 2008 | 9,971 | 9,363 | 8,188 | 12,512 | 15,768 | 13,337 | 14,744 | 13,115 | 15,424 | 9,115 | 11,097 | 10,576 |
| 2009 | 8,109 | 12,058 | 12,545 | 7,388 | 10,014 | 9,122 | 7,844 | 9,557 | 9,272 | 11,468 | 8,881 | 12,098 |
| 2010 | 12,932 | 11,672 | 14,327 | 9,255 | 8,128 | 6,043 | 7,013 | 8,320 | 7,007 | 6,850 | n/a | n/a |
| Foreign-exchange reserves excl gold (US$ m) | ||||||||||||
| 2008 | 108,952 | 115,963 | 119,963 | 123,755 | 124,860 | 125,480 | 124,761 | 122,263 | 109,446 | 99,899 | 97,373 | 91,149 |
| 2009 | 90,941 | 90,702 | 87,434 | 87,343 | 87,948 | 91,154 | 90,775 | 92,955 | 94,810 | 94,904 | 95,032 | 95,432 |
| 2010 | 95,656 | 95,506 | 94,003 | 94,683 | 94,110 | 93,336 | 93,650 | 93,861 | 99,205 | 103,825 | n/a | n/a |
| Sources: IMF, International Financial Statistics; Haver Analytics. | ||||||||||||
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