Published January 16, 2009

Razaleigh pushes oil and gas plan

M'sia should create the first spot and futures exchange in an Islamic country

By S JAYASANKARAN
IN KUALA LUMPUR

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FORMER Malaysian finance minister Tengku Razaleigh Hamzah, 72, proposed yesterday that the government eschew 'stimulus' packages involving pork barrel spending for ambitious programmes involving oil and gas and national housing that would have the maximum multiplier effects on the economy.

In a speech before the Asian Strategic Leadership Institute, the prince from Kelantan state cited various reasons for making Malaysia Asia's leading oil and gas centre with capabilities in refining, shipping, distribution, storage and downstream production. He cited Malaysia's own reserves, Petronas, and the fact that over half the world's annual merchant fleet passed through the Malacca Straits. Building on that, he suggested that Malaysia create the first spot and futures exchange in an Islamic country.

The prince also proposed a home ownership programme for all Malaysians not unlike Singapore's argument that home construction involved almost every major sector in the economy. For both developments to succeed, however, the prince stressed that the public delivery service had to be revamped to bring it in line with 21st century demands.

In many ways, it was a remarkable speech that pulled no punches. Tengku Razaleigh, a lawmaker, had offered himself as a candidate for the presidency of the United Malays National Organisation (Umno) - which carries with it Malaysia's premiership - but the party had rejected him outright. His speech showed that he would not go quietly into the night.

He may have been right in many ways as well. 'The country can no longer afford a political class out of touch with reality that trades on yesterday's political insecurities and a government that has forgotten its purpose,' said the prince. 'We need a renewal of leadership as a first step to restoring true confidence.'

He lambasted Kuala Lumpur for sugar-coating the dangers of the global financial turmoil and warned that 2009's growth could be 'well under' the official 3.5 per cent, pointing to the sharp drop in industrial activity and export plunge in November.

'There has been a dramatic swing in the balance of payments to a RM31 billion (S$12.9 billion) deficit in the third quarter, from a RM26 billion surplus in the second,' said Tengku Razaleigh.

'Our leaders only undermine the government's credibility when they paint an alternative reality. I understand we don't want to frighten markets . . . but we do not live in an information bubble. Leaders who deny the seriousness of the crisis only raise the suspicion that they have no ideas. They undermine the government's credibility when that very credibility, that confidence, is a key issue.'

And he fretted that even if Malaysia did achieve 3.5 per cent growth, it wasn't enough to absorb unemployment. 'Given our demographic profile and the fact that we are an oil exporter, our baseline do-nothing growth figure is not zero per cent but closer to 4 per cent. We have a problem.'

According to Tengku Razaleigh, Malaysia was squeezed between 'the low cost manufacturer we once excelled as, and the knowledge-intensive economy we are failing to become'.

'We are in the infamous 'middle income trap'. No longer cheap enough to compete with low cost producers and not advanced enough to compete with more innovative ones, we find ourselves squeezed in between with no economic story,' he said.

And he bemoaned the lack of progress made by the country. He cited World Bank statistics stating that Malaysia's share of gross domestic product (GDP) contributed by services was 46.4 per cent in 2007, compared with 46.2 per cent in 1987 while real wages had only grown 2.6 per cent a year during the same period.