A Closer Look at LGE's Speech at Oxford

Lim Guan Eng’s recent speech at Oxford University, England last week deserves closer scrutiny.

No natural resources?

According to that speech,  LGE said Penang  is the second smallest state “with no natural resources but has progressed to achieve high-income economy status through good governance, rule of law, integrity in leadership and sheer human talent”.

Many writers have acknowledged the scarcity of natural resources in Penang but to overgeneralize in such an absolute statement to declare Penang has NO natural resources at all is certainly wrong. Just last month, Yang di-Pertua Negri Tun Abdul Rahman Abbas said in his 77th birthday speech that Penang does not have much natural resources (tinyurl.com/pxb3cg6).

Worse still, LGE’s bizarre statement shows he does not read the reports from Invest Penang, especially the April 2015 report (tinyurl.com/q939yyo) which stated:

Table 1 estimates that although Penang’s mining and quarrying sector registered the highest growth of  14.5%in 2014, the sector’s share in Penang constituted merely less than one per cent of Penang’s total GDP.

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High-income hopes hobbled by the 30% depreciation in the ringgit?

LGE declared “that the precipitous drop in the value of the ringgit due to extraneous factors such as the 1MDB RM42 billion financial scandals on world currency markets, makes Penang technically not a high-income economy this year.”

What Lim Guan Eng stated in Oxford is in sharp contrast with what was reported by “a state think-tank, Penang Institute headed by Dr Lim Kim Hwa from Cambridge University, that explores new ideas and how to make them work.”

I quote from the Penang Economic Outlook – 2015 by Dr Lim Kim Hwa (tinyurl.com/pbvvbl7):

The external macro environment, in particular the crude oil price, the timing on the start of the rise in US interest rates and its ensuing impact on financial capital flows, will introduce higher volatility to Malaysia’s economy, including the risk of twin deficits. Nevertheless, Penang is expected to continue to contribute trade surpluses in 2015 due to the weakening of the Ringgit, and the state budget is expected to remain in surplus.

LGE’s pessimistic outlook contradicts what Invest Penang reported (tinyurl.com/q939yyo):
Penang’s GDP has been growing over the last five years. Following the recent release of data on Malaysia’s GDP growth for 2014 by Bank Negara Malaysia, the state GDP has improved to 5.9%, posting a  0.2 percentage point higher than that of the previous projection made in January 2015 (Figure 1).

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RM1 billion to build affordable housing in the state?

In the Oxford speech, LGE announced that a public fund of RM1 billion had been set aside by his government to build affordable housing in the state and that the money was from an auction of a piece of land on the island via an open tender to the highest bidder.

According to LGE’s  speech (tinyurl.com/qdfnavj) given at the Ground Breaking Ceremony for Public and Affordable Housing Scheme in Jalan SP Chelliah (March 17th 2015):

“The state government has established the Public Housing Fund and Affordable Homes Fund, the largest by a state government in Malaysian history, worth RM 500 million to build 22,545 public housing units ( less than RM 72,500 ) and affordable housing units ( less than RM 400,000 ).”

How can it be that in a 7-month span from March 17th to October 16th, the budget for affordable housing ballooned from RM500 million to RM 1 billion?

The Auditor General report in 2010 showed that Lim’s administration failed to build even a single low-cost house since governing the state.

Penang tabled a RM992.82 million budget for 2015 with an estimated deficit of RM230.31 million, the fourth consecutive deficit budget for the state since 2011(tinyurl.com/omobwz6) with a 5.22% increase (RM44.04 million) in management expenditure this year. This was to increase funding to Penang Development Corporation for the affordable housing scheme and additional allocation to fund social programs.

Therefore, the figures and developments just do not make sense.

Money, Money, Money

The expenditure on glam projects is also quite alarming. LGE announced the state government is rejuvenating the historical central market of Sia Boey into be a Heritage Arts District with RM 100 million (15 million pounds) which will include a public art museum.  Note that the state budgeted only 27 million on tourism so how will this expenditure be met? Is such a huge amount justified when the main need of Penangites is affordable housing, bearing in mind state affordable housing prices are not that affordable when buyers have to pay for add-ons.

LGE also announced the state spent RM20 million without expecting any returns on “an accelerator programme known as @CAT at an elegant historic building within the George Town's heritage enclave offering very low rates for coding classes, students and start up entrepreneurs to gain access to mentors and shared services”.  How would the RM million be spent? Is it wise to expect no returns?  

Most shocking is LGE’s statement that his government “made rubbish collection as part of a strategy to provide decently paid jobs to those at the bottom 40% households” by offering  jobs at RM1300 per month for the job of a rubbish collector. There were 10 times more applicants than the 2,500 positions available, all Malaysians.  

Subsequently, he asked the Seberang Prai Municipal Council to take back these jobs from private contractors and offer them instead to locals by directly employing them at a higher salary.

The next part of his speech shows why he declared he is a failed accountant at a Penang ACCA forum in 2012 (tinyurl.com/d9loxjk):

The plan worked and even though we are spending 40% more than before or extra RM30 million, but at least we can say that we are feeding 2,500 families rather than allowing the profits to be enjoyed by the private contractors.

Original wages: 900rm x 2500 workers x 12 months = 27 million

New wages: 1300rm x 2500 workers x 12 months = 39 million

Increase in costs with the change in policy = 12 million or 44.44% (not 40%)

Thus, his statement in the speech is wrong. They are spending 44% more, not 40% and the increase is RM12 million, not RM30 million.

More importantly, is it wise for the state to make such a move that incurs extra expenditure?

I would encourage more learned Malaysians to test what LGE has written in other parts of the Oxford speech and all his other speeches. The discrepancies in content show telling the truth seems to be a problem but distortions are a gift.


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