Thank you to Warwick Malaysian Students Association for having me today. It is good to be back, even if it is only virtually. Since the organisers have given me a “cart blanche” for this keynote address, I thought I would talk to you about “Making a better Malaysia”, a passion that I hope that you would all share with me.

For the benefit of those who don’t know much about me, let me first summarise my career: I joined CIMB in 1989, straight after earning my degree and masters in the UK. I was CIMB Group CEO 1999-2014 during which CIMB grew exponentially from a small local merchant bank to ASEAN universal bank, and then I became CIMB Chairman 2014-2018. I served as an EPF Investment panel member for 12 years and on the Khazanah board for 4 years. Since 2018, I have been Chairman and Founder of Ikhlas Capital, an ASEAN Private Equity firm. In 2019 I was also a Visiting Fellow at the Blavatnik School of Government, Oxford University where I focused on Nationhood Recalibration, looking at preconditions for systemic reforms in Indonesia post AFC, Malaysia post May 13th and the like. In short, I had a front row seat to the Malaysian economy for over 30 years.

When I am asked about the Malaysian economy, I often quip that Malaysia doesn’t have an economy, it only has a political economy. As an undergraduate I studied Economics and Politics, the joint degree, but I never anticipated the extent to which the 2 would be so intertwined in Malaysia. We have extensive elements of a command economy and yet our posture is one of a capitalist free market one.  It is sometimes more dangerous to pretend to be what you are not. 

The Malaysian Government has a huge presence in the economy. From the legacy of licenses and quotas that date back to the British, to state development agencies and affirmative action rules of the 1970’s, to Government Linked Companies that now constitute about 40% of Bursa Market Capitalization. And to the rampant practice of money politics which often influences decisions on government regulation, policies, procurement and GLC action.

It does take both front-line experience and then some distance from it, to fully appreciate how distortive and damaging much of this has been. While I was in the thick of it, during my CIMB career, I think I had a pretty decent moral compass, but I was a very willing key actor in the system. If something didn’t seem morally right, I would sometimes speak up but more often I would prefer to say it was none of my business. Most of us in the system were like that, and when I did speak out and campaign against the shenanigans at 1MDB and Felda, the pressure to silence was intense; that that is a story in itself which I won’t get into here. But suffice to say that the extreme centralization of power in the office of the Prime Minister compounds the issue of the systemic dysfunction because of the lack of accountability and checks and balances on the part of the ultimate decision-maker. 

Some symptoms of the dysfunction that I can share from my own experience: -

1. 1MDB was the most extreme manifestation of it. A sovereign wealth fund with the explicit backing of the government was used to raise billions of dollars for both development projects and political funding, and along the way there were massive leakages of funds for nefarious purposes.   
2. The first modern financial scandal though was the BMF affair in the early 1980’s when a Bank Bumiputra subsidiary lent billions to a Hong Kong property developer without proper collateral or approvals and again with substantial sums diverted; many believe to political activities in Malaysia.
3. There also were many smaller deals that would have added up to huge amounts. In the early 1990’s I was a junior CIMB officer in charge of IPO’s for listing companies on the stock exchange. Almost every case involved preferential allocation of shares to bumiputra in the name of the New Economic Policy. Yet there were never clear nor consistent processes of selecting who would get the shares (which were lucrative as IPO pricing back then was controlled by the government and set low to ensure buyers made good money). Invariably it was those with political links that had best access to share allocations; so rather than redistributing wealth to the bumiputra needy or value creators, a lot of money went into the highly distortive cauldron of politics.
4. In the mid 1980’s a peculiar model of developing bumiputra billionaires emerged where the government supported politician-hand-picked individuals to become businessmen. The government support included directed lending by under regulated banks. This model grew on steroids when massive amounts of foreign capital came into our capital markets in the early 1990’s; and crashed spectacularly in the Asian Financial Crisis. With hindsight, why did we think politicians can handpick good businessmen? And why would beneficiaries of easy money build solid businesses? Many of these failed companies were nationalised into today’s GLC’s in the aftermath of the crisis. So, the extent of government control didn’t really change after the AFC; the corporate nexus between government and major businesses remained, the difference being individuals were replaced by professional managers reporting ultimately to the same political masters.

I am not criticizing the post 1970 system that was put in place following the May 13th 1969 breakdown in civil order. I think there was the need for those major systemic changes- greater government involvement in the economy, affirmative action for the bumiputra, amendments to sedition laws, Rukun Negara and the formation of a grand coalition of parties (Barisan Nasional) to govern the country. And much was achieved and in relative terms Malaysia has had much to be proud of. But even the authors of the system acknowledged that they were innovating out of desperation and that the system should be reviewed from time to time. In the case of the NEP, there was even a specific time-line of 20-years to fix the inter-communal economic balance to set the foundations for communal integration and nation building. And while our leaders, Tun Razak and Tun Dr Ismail, recognized the amplified risk of corruption in the new system, they placed trust in individuals driven by a mission to build a new nation. It was actually soon apparent that corruption was seeping in, but it certainly got worse as competition for political positions and spoils increasingly overshadowed nation building.

It has now been 50 years and the 1970-designed system remains substantially in place, entrenched by vested interest and the ease with which race and religion can be mobilized in its defence. I have been arguing that the system is no longer fit for purpose and that Malaysia is in dire need of a system reset. Since the AFC we have been under-firing economically, growing apart as communities, losing our best talents and falling behind newly emerging countries like Indonesia and Vietnam for FDI. 

When PH came to power in 2018 many, including myself, were hopeful that they would follow through with their reform agenda as articulated in their election manifesto. But they did very little of it, unable even to implement UEC recognition or sign International Convention on the Elimination of Racial Discrimination; both relatively benign reform initiatives they promised. 

For me the PH experience reaffirmed that our system is like a badly written play. You can change the cast and have the world’s best actors but the play will still be lousy. The system sets incentives for politicians and political parties to behave in a certain way and sadly our system encourages them to be too divisive, too vulnerable to monetary incentives and too deferential to power.  

Another way of saying the same thing is: Our system has evolved to become one run by a three headed monster- Identity, money and power concentration. I don’t have the time to go into how this came to be, it is more important to use the time left to talk about how to fix it. 

During my visiting fellowship at Oxford and now in partnership with some academics and civil society, I am pursuing the idea that we need a system reset. We have embarked on a 6-month study to gather the view of Malaysians across the various spectrums of society and are also soliciting ideas from the wider public at mybetterfuture.org. One basic question is whether we should advocate the set-up of another National Consultative Committee, which was the deliberative platform used back in 1970 where a group of 67 people deliberated the various systemic reforms before democracy was reinstalled. I personally don’t think we should just copy what worked then but we can learn from that experience. We can also learn from the recent trend of deliberative platforms across the western democracies, such as the national assembly in Ireland which successfully dealt with the hugely controversial issue of abortion. Deliberative platforms can in fact complement representative democracy, and it can be a purer form of democracy compared to one where constituents delegate their voice on all issues to one person until the next elections.

And then there is a question of whether there can be a better Malaysia at all? Whether these frustrations and failures that I mentioned are just part and parcel of democracy and growing pains of a new nation. It is therefore important that we conceptualize the sorts of reforms that could make for a better Malaysia. I believe the case is compelling even if we just imagine 1) new institutional rearrangements to have an effective referee to political competition, 2) clear separation of business, government and politics and 3) electoral reforms. And I am sure many would agree that if our best minds and leaders deliberate and “give and take”, to improve the guiding principles for our inter-communal social contract, education system and affirmative action, we can get some new formulas that are more relevant for today’s Malaysia and Malaysians. 

In short, at the risk preempting the conclusion of our study, I for one am convinced that there can be a better Malaysia.

Ladies & Gentlemen

I hope I have outlined enough of my thoughts on “Making of a Better Malaysia” to stimulate a conversation this morning. The stakes are huge, the stakes are especially huge for your generation. On behalf of mine, I would apologise that we have allowed this nation that we all love to be in the state that it is today. For what it is worth though, I am actually quite optimistic because I can sense that more and more people want systemic reforms. In the end politics will respond to the people so long as the people are heard.