In charting the course of Malaysia' growth, there were obvious, significant, qualitative changes in the nature of governance and government policies since Dr Mahathir Mohamad took over the reigns of power, went the opening line of Prof Jomo K Sundram's speech on the Eighth Malaysia Plan and the Third Outline Perspective Plan (OPP3) at a DAP seminar in Kuala Lumpur last Thursday.

He said during the 1985-6 recession, the Fifth Malaysia Plan was rendered irrelevant by economic realities as the plan was revised not once but twice by the same prime minister who had to abandon many original planned targets in order to accommodate significant changes in Umno.

The revised plan had greater emphasis on private accumulation and the private sector, with policies such as Malaysia Incorporated and privatisation. This change became more evident when the then Finance Minister Tengku Razaleigh Hamzah quit his post in 1984, to be replaced by Daim, added the Universiti Malaya economics lecturer.

Jomo said significant changes in economic policies took place during this period with the half-way implementation of the New Economic Policy (NEP). However, by the 1990s, when the last segment of the NEP ended, more and more segments of the rakyat became disinterested.

The lack of interest had a lot to do with terminologies. To this date, the policy which succeeded the NEP is referred as the New Development Policy (NDP). Many did not notice that it was in Parliament that the name of the policy was changed from new to national, making its actual name, the National Development Policy.

However, Jomo was quick to point that "this is not about who has the correct terminology but to relate how irrelevant the policy is. Many do not even know what the name of the policy is and why it was changed".

"Suddenly we have the OPP3, which is supposed to be a National Vision Policy. With such confusion, planning and policy pronouncements became increasingly irrelevant to the public, business and investing community," he added.

This development has to do with a very different approach towards governance, running the country and relationship between government and the population, government and society and the balance of power, he said.

He said the nature of governance has changed and it is not difficult to see how the executive has been strengthened at the expense of the judiciary, legislature and how Parliament has become increasingly irrelevant.

For example, he added, it was ironic that a major increase in public spending involving RM3 billion was being announced without the involvement of the Finance Minister.

Continued privatisation

He lamented after the 1997-98 crisis, it was hoped the government would have learnt their lesson and there would be an end to the mega-projects. Instead, what happened was a return of such projects, the latest being a conference centre in Putrajaya, he added.

He said the main trend in the last two or three years was the "continued privatisation of profitable assets and profits and continued re-nationalisation or nationalisation of private debt and private liabilities" such as the bailouts of Star and Putra LRT transport systems and the Indah Water Konsortium by the government.

"Hospital support services used to cost RM140 million a year in1995. In 1996, after it had been privatised to three companies, the cost went up to over RM440 million per year," said Jomo.

"Although it is probably true that services have improved over the years but does that warrant a tripling of cost?" he queried.

Jomo said we were not likely to see the privatisation of huge entities but a parceling-out or breaking up of huge entities, where profitable parts will be privatised.

"When we say privatisation, we normally think that risks would be increasingly borne by the private sector."

However, he added, "Make no mistake, the Malaysian government cares for the private sector. It will not allow the private sector to bear such risks, instead the Malaysian people will bear the risk for the private sector.

"According to a study which has not been published, the estimated 'contingent liabilities' that the government has incurred so far is in the range of between RM25 billion-RM30 billion."

Explaining what is meant by 'contingent liabilities', Jomo said, "If there was not enough traffic for roads that had been privatised to a toll operator, the government would pay the difference to the toll operator. In the event the chap is not making money, the government would buy over at a certain price, such as the bailout of MAS."

Shift in priorities

A shift in priorities can be seen in the recent plan if one compares the situation now to the 1970s, for example, when there were more rural development efforts such as building rural clinics, reducing inequality and poverty.

"The record now is quite different because it suggests, on the contrary, greater private accumulation in the hands of the relatively few, where government powers are increasingly used to enrich the relatively few and this reflected in various ways such as the increasing concentration of wealth, in the stock market and elsewhere, and worsening of income distribution," said Jomo.

He said the 8MP acknowledged that the gap between the top income bracket and the bottom bracket had actually increased. In addition, there has been actually a relative increase in the extent of foreign ownership of the economy in the last few years.

"It was probably due to poor economic management and poor governance which led to the crisis of 1997-8. How did the government deal with this? The nature of the policies and kind of protection that were introduced to deal with the crisis were what is now popularly known or referred to as bailout programmes especially for the politically well connected," he added.

"The last two decades of the Mahathir period also saw the declining trend in social spending as opposed to security spending. Since Independence, education spending was given greater priority by the government as it exceeded other spending, especially security spending.

"In the 1990s, however, the education budget was slashed with a visible increase in security spending. In 1989 Malaysia signed the Haadyai Agreement with the Communist Party of Malaya which put an end to hostilities from the communist guerilla movement. In the same year, there was also the collapse of the Berlin wall, the disintegration of the Soviet Union and the beginning of the end of the Cold War," said Jomo.

"Why did this happen when the world was experiencing a time of relative peace? When you expect a decline in security spending but find instead an increase, why?" he then queried.

One of the big signals in the reconciliation between Mahathir and then British Prime Minister Margaret Thatcher in the late 1990s was the memorandum of understanding between Malaysia and British, which made it possible for Malaysia to buy 0.5 billion pounds worth of arms.

"We all know that the area of buying arms is the least transparent and has very little accountability," said Jomo.

"At that time, Malaysia paid twice the price Indonesia paid for a Hawk (fighter plane). I am sure nobody will insist that Indonesia had a government at that time which was clean and uncorrupt and yet we paid twice what Indonesians were paying," he added, much to the amusement of the 600-odd participants.

"Malaysians have a very perverse sense of humour, they clap when we lose money," Jomo then noted.

Education concerns

The 1990s also saw the decline of achievement in the education sector. To date, only seven percent of the university age group actually attended university. This is undoubtedly very low by international and regional standards although the percentage was very much lower in the 1960s, said Jomo.

Malaysia fared lower than South Korea which has more than 50 percent attending university, Taiwan 40 percent, Japan 50 percent, Philippines 30 percent and Thailand 20 percent. Even Indonesia achieved 11 percent before the crisis.

"Once I told this to the then Education Minister Najib Abdul Razak on a TV programme broadcast live and he insisted that the Unesco figures were wrong," said Jomo, who quipped that it was the last time he was invited to attend a live TV programme.

He said Najib had commented that the figures were wrong because they did not factor in those who were college trained, such as teachers and nurses.

"Even with the inclusion of teachers and nurses, the figure goes up to slightly over 10 percent, perhaps closer to 11 percent in mid 1990s, but still just about the level of Indonesia," said Jomo.

And just how does the government plan to deal with this?

By creating open universities, it announced, said Jomo.

"I emphasise 'open universities' because economists would know that this would not be wise from the point of view of basic economic law. The economy of scales is not applicable to education.

"It does not make sense to have so many open universities. We already have a privatised university called Unitar (Universiti Tunku Abdul Rahman) and a number of other open international universities which were supposed to provide long-distance programmes," he added.

He said rather than disperse efforts with so little effect (as is the case with this country), it is far better to concentrate resources and have one good distance-learning programme than a multitude of programmes that were 'relatively poorly maintained' and where there was a great deal of duplication of courses, resulting in some sporting dubious quality.

"The government has failed to provide leadership in a variety of areas where social needs and social requirements have been changing," said Jomo.

"It is not simply a question of education. But the right education is extremely crucial in terms of ensuring our competitiveness in a developing economy, in ensuring adequate human resources that will be necessary for economic development," he added.

New frontier

According to Jomo, there has been some adverse development in the area of health services where some of the more profitable sectors in healthcare have already been privatised, for example, supply of pharmaceutical drugs has become increasingly privatised with people having to pay more for drugs or discover that certain drugs were no longer available in public health services.

He said two or three studies for the intended privatisation of Malaysia's health services did not go through although there was an attempt before the 1999 general elections to begin the whole process by getting people in the sector to agree to the corporatisation of health services.

In recent years, he added, more than 300,000 Malaysians have signed up for various types of health insurance schemes. International health insurance companies as well as domestic insurance companies see this as the great new frontier for making large profits.

"There is a great deal of interest in this area and very sadly, a tremendous indictment of the quality of health services," said Jomo.

To justify his claim, Jomo said, Cuepacs, the federation of unions for workers in the public services who are entitled to free health services in the public health care system, had signed up with a private health insurer to provide services for its members.

"At one level you can say that this is a union which is in cohorts with the private sector. At another level, however, one can say that it is an indictment of the deterioration of health services in this country," he said.

Jomo said Malaysia is moving increasingly in the direction of the United States health care system - it is heavily privatised and lobbyists have stood with much opposition in the way of reform, notwithstanding that one of the first major failures of the Clinton administration in 1993 was the inability to push through health care reforms because of the power of US health maintenance organisations or health care organisations.

"We have to avoid that kind of situation where private health financing organisations see the opportunities to make money from health insurance and are less interested in the health status of the population," said Jomo.

He said, in the US, although more than 14 percent of the gross national product was spent on health, the country does not rank among the top 20 countries as far as health indicators are concerned.

"We should instead be looking at some Commonwealth countries such as Britain, Canada, some of the European systems as well as systems in other parts of the Third world. The health care system in Costa Rica, for example, is worth thinking about and emulating. A market-based system as found in the US is inferior in terms of the quality of health care provided," he said.

"However, the main direction of the debate here and proposals (which are not public by the way but are found rather in the Economic Planning Unit, not even in the Health Ministry) has been to move in this (US) direction.

"Where are we going? We are moving in exactly the opposite direction," he said.

Urban poverty

As far as housing was concerned, Jomo said that in the 1970s and first half of the 1990s, there was a fairly major low-cost housing programme. However, despite the continued growth of the problem of housing in urban areas, the government declared a change in policies in the mid-1980s.

Although 78 percent of the housing target was not met, Jomo said the Finance Ministry decided that housing, low-cost included, should be left to the private sector, after which, the government lowered the housing target so that when the 7MP was reviewed, 90 percent of the housing target was reported to have been met.

"Other than low-cost housing, we find that sites and services, provision of water, electricity and other types of facilities have also been neglected," said Jomo.

"The only time you can ever hope for low-cost housing is when you're evicted, when someone wants your land and then conveniently a fire breaks out. That is the reality. I know various people who have scars on their stomachs inflicted by gangsters the housing developers have often brought in," he said.

Jomo said the problems of urban poverty have been not simply the lack of housing but drug and sex abuse among the youth as well.

"We need leadership and this government unfortunately has not only failed to provide the leadership, it has prioritised certain policies, certain interests, and has actually made the whole situation far, far worse," he said.

"These are issue which will continue to haunt us as we go into the 8MP period and OPP3. It is extremely important that Malaysians continue to work together, to strengthen the elements of checks and balances in various ways such as the Parliamentary system and the mass media to ensure public access to information.

"If the Malaysian public fails to provide any resistance to the steady erosion of these checks and balances, we will continue to be here, clapping away at the deterioration of the nation, national accounts, social and economic conditions and national welfare.

"Unfortunately, after that, there will be nobody to cry together with us," was Jomo's parting words.