The first National Outlook Conference (NOC) was set for the first Tuesday of December of 1986, for two days. Following a structure that was retained for every subsequent annual national outlook conference held by the Institute, the inaugural 1986 NOC was planned as the official launch of MIER. After the opening speeches, by the chairman of the Board of Trustees, and Tun Daim the Minister of Finance as the guest of honour, the first session in the morning would cover the world and regional economic forecasts and followed by the main feature, the MIER economic forecast for Malaysia for the following year, in this case for 1987. The afternoon session of the first day was devoted to topics that go into greater depth the issues raised in the overall annual forecasts, including trade prospects, investment and sectoral outlook. Then the second day sessions were given over to longer-term economic issues, on industrialization, technology or the public sector fiscal situation, as the case may be that were the economic concerns at the time. The concluding session was usually a panel discussion consisting of prominent speakers selected from diverse backgrounds, leading politicians, captains of industry and academics on a relevant economic theme for the year.
The national outlook conferences were a hit from the very first one, and grew in reputation as an economic event anticipated by both the private and public sectors, and the academic world. For companies and investors, both domestic and foreign it was an independent source of economic analysis, to check against official figures and their own internal assessments. The NOC economic assessment was strategically set in between the Budget announcement in Parliament, together with the release of the Treasury’s Economic Report, usually given on the last Friday of October, and the release of the Bank Negara’s annual report in March the following year. Feedback later indicated that the MIER forecasts would often be referred to in Cabinet meetings when economic prospects were being discussed. Positive response from the private sector to MIER’s economic forecasts and the two quarterly industry and household surveys encouraged us to set-up the Forecasting Club, a subscription-based economic grouping that enabled members mainly corporations and banks to previews and free access to the institute’s economic forecasts, and generate some income for MIER. By the third NOC in 1988, we had a membership of twenty in the Forecasting Club.
For the inaugural annual forecasts, I had Richard Busczynsky of the World Economic Forecasting Association (WEFA) to present the world economic outlook 1987-88. WEFA was founded in Philadelphia by Lawrence Klein, the Penn University economics Nobel laureate, with whom I had taken a class, and was located in University City just off the Penn campus. Klein’s WEFA group was responsible for the World Link project, which provided an econometric framework to link national forecasts in a consortium under the sponsorship of the United Nations ESCAP, based in Bangkok. Busczynsky would return three times to the annual NOC conferences. The economic forecasts by MIER would successfully track the progress of the country’s economic recovery out of the 1985 recession: it forecasted quite accurately the GDP growth rate of 2.47%, 4.7% and 8.1 % respectively for the three-year period 1987-89 of the recovery. Awang Adik, who was then a member of the economics department of Bank Negara and a Wharton School graduate, just like Zeti Aziz who was its head at the time, had remarked that the 1989 GDP growth forecast was exactly on the mark as confirmed by BNM for that year. This result was a prelude to the era of high speed growth of the Malaysian economy over the next decade. And MIER was there to document it. P. Shanmuganathan, formerly of the EPU before joining the private sector, and a member of the Institute’s Advisory Panel along with the likes of Rama Iyer, then newly retired from the civil service, Paul Low of Malaysian Sheet Glass, Yong Poh Kon of Royal Selangor Pewter, and KJ Ratnam, later joined by Anuwar Ali, who went on to become VC of the National University of Malaysia and still later the Malaysian Open University, pointed out that MIER had brought back the glamour of economic growth after years of the implementation of the NEP.
Just after the first NOC, I was conscripted by UMNO Youth Economic Bureau, then led by a young Najib Tun Razak to help with the economic recovery plan the youth wing of the ruling party was proposing to the government. Jamaluddin Jarjis was the junior liaison officer for the working group. After several consultations we devised a series of economic measures to encourage recovery including relaxation of the foreign investment code, some adjustment to the Industrial Coordination Act, privatization of certain government entities, a few tax measures including lowering of both the corporate tax and personal income tax over a three-year period, reducing the federal deficit, including reform of some of the loss-making businesses under the State Economic Development Corporations (SEDC) which mushroomed during the previous fifteen years of implementation of the NEP. We also proposed for the first time the option of real estate investment trusts (REITs) as a means to stimulate the property sector. At the formal presentation to Daim Zainuddin, the latter proposal particularly caught the interest of the Minister of Finance who instructed Sherif Kassim, then secretary general of the Treasury to look into it; but it was not until nearly two decades later that REITs were adopted for implementation by the Securities Commission. To address the graduate unemployment problem, the committee proposed the introduction of a National Youth Corp along the lines of the American Peace Corp to engage youths in the national rebuilding effort. This idea was not taken up then, but nearly two decades later was implemented as the National Service Programme (PLKN) amongst senior school attendies.
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| Ghani Othman |
It was not all economics during my early years in MIER. I had informally created a “Monday Club” in the institute, which met the first Monday evening of every month, to bring together economists from the university, government and the private sector to engage in conversations about the economy and politics. Ismail Salleh, Anuwar Ali, Aziz Rahman of UPM, Ghani Othman then already a deputy minister, Harun Hashim and Abu Bakar Karim of the EPU and a few others including Zainal Aznam, later to become my deputy in MIER, attended these sessions. It was a time of political uncertainty amidst the national economic recovery, particularly in UMNO, the dominant political party in the ruling national coalition, the Barisan National (BN), triggered by the resignation of Musa Hitam as deputy prime minister. On the MCA side, the junior partner in BN representing Chinese political interests, the deposit-taking cooperatives (DTC) scandal in 1988 had devastated the leadership of the party that eventually led to the resignation of its president Lee San Choon and the rise of Ling Leong Sik. This MCA leadership crisis was mediated by Ghaffar Baba, then secretary general of BN.
On the UMNO side, the split between Mahathir and Musa had eventually led to the creation of two rival factions, Team A and Team B in the run-up to the UMNO Supreme Council elections at the end of 1987. Team A was led by Mahathir and Ghaffar Baba, who was appointed deputy prime minister to replace Musa Hitam, with Anwar Ibrahim, Sanusi Junid and Daim Zainuddin among other stalwarts firmly behind the Mahathir-Ghaffar team, while Team B was led by Tengku Razaleigh Hamzah and Musa, and joined by a few cabinet ministers including Abdullah Badawi, Rais Yatim, and Shahrir Samad, and the erstwhile Perak MB candidate Zainal Abidin Zain, then Bagan Serai parliamentarian. Musa Hitam and Tengku Razaleigh twice competed against each other in previous party elections as candidates for deputy president of the party and by tradition deputy prime minister designate, which Musa won on the back of implicit support by Mahathir. Now the situation was reversed, with Tengku Razaleigh challenging Mahathir for the president’s post and Musa against Ghaffar for the deputy president’s post. Tengku Razaleigh, lobbied heavily by Musa, eventually formally announced his candidacy at his UMNO division’s meeting in Gua Musang, and Team B was formally launched. I was at that meeting as a detached observer, having greeted Musa Hitam in a Kota Bharu hotel cafe the night earlier. In this build-up towards the Team A-Team B clash in the subsequent party campaign, Abdullah Badawi had sought some advice from me concerning economic issues in the country. I had managed to maintain some neutrality between the contending parties through the cover of professionalism as head of MIER and still not being a card-carrying member of UMNO then. As it turned out, Mahathir won by 47 votes and retained his presidency and the premiership of the country. Upon declaration by the courts that deregistered UMNO, Tengku Razaleigh formed a new party Semangat 46, with the support of Tunku Abdul Rahman, the country’s first prime minister, and Hussein Onn, the third prime minister, to revive the old UMNO, while with the power of incumbency Mahathir created UMNO Baru (New UMNO), and thus the Mahathir-Anwar-Daim collaboration took off that played a dominant role in subsequent economic and political developments in the country. In the aftermath of political fallout, Abdullah Badawi was retained as a minister in Mahathir’s new cabinet, while Tengku Razaleigh and his supporters were dropped.
The Team A-Team B clash had a devastating impact on Malay unity, a powerful factor that spread out into the whole body politic, and changed the political economy of the country. At stake was the Malay agenda underlying the New Economic Policy and control of the resources to achieve the goals of economic restructuring, including the establishment of the Bumiputera Commercial and Industrial Community (BCIC). This clash of means translated into various political agenda and manifested in the Pas-UMNO struggle for the Malay heartland in the north and east of Peninsula Malaysia, and in Sabah and Sarawak politics, as well as in the university campuses. In this clash of minds and strategy saw the emergence of a nationalist fraction and the opposite stance of a liberal-progressive mindset that followed the split in UMNO. Many were caught in the middle of this struggle for the Malay mind, and threatened the unity of the dominant Malay community. Among the Bumiputera business community, this translated into the campaign for the leadership of the Malay National Chamber of Commerce (DPMM) between the corporate faction which was led by its candidate Wan Azmi Ariffin, endorsed by Daim Zainuddin, and the contractors/small businessman class led by its candidate Abu Bakar Lajim. The politics of the DPMM mirrored that of UMNO itself.
Alarmed by these developments and the concern among the professional class and independents in government and industry with the root cause of this clash of minds and the threat to Malay unity, Ghani Othman, Malik Munip and myself and a few members of the MIER’s “Monday Club” sought to organize support to bring together the different Malay interests into a common platform. The immediate task was to bring together the four leaders of Team A-Team B to agree to a common declaration of Malay unity. We worked hard in the MIER Monday club to put together a draft resolution leading towards what was eventually dubbed as the Johor Declaration of Malay Unity conference to be hosted by Muhyiddin Yassin, then the Johore state premier, to be held in the formative home of UMNO. With much effort we managed to persuade the four principals to sign on the Draft Declaration on Malay Unity, which was orally presented by the nominated orator Lukman Musa, at the Johore Malay Unity Conference in JB in the middle of 1988. A full page advertisement was also taken out in the Utusan Malaysia signed by some fifty prominent Malay personalities to appear on the day of the conference attended by UMNO representatives and Malay NGOs from around the country.
Looking back, I was not persuaded that the Malay Unity Declaration had made much impact on the issues associated with the implementation of the New Economic Policy which was the principal concern of MIER. But the 1987 UMNO leadership elections and the Team A-Team B contest had changed forever the conduct of party politics and marked the beginning of money politics that were to plague the party for many years to come. It was also the watershed point for Mahathir’s economic administration between the first period up to the 1985 recession (actually up to its recovery in 1988) (Jomo Sundaram and I had dubbed this period Mahathir Mark I), and the subsequent period of high-speed growth in the post-NEP period after that in the last decade of the twentieth century (Mahathir Mark II). MIER again would play a role in that transition from an economic policy point of view.
After the dust had settled over the Team A-Team B affair, our attention turned to the serious analysis of the Malaysian economic recovery and the search for a new policy to replace the NEP after the formal end of the twenty-year period under the first Outline Perspective Plan (1970-1990).
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