First letter to Malaysian PM

I write this letter in order that certain aspects of our Malaysian economy and engine for growth and development and industrialisation can be changed. I, personally, do not have the answers but am very aware of the question that need to be answered. Furthermore I would like to apologise if I appear to be very blunt or hurtful as this is not my intention. I am an engineer by profession (and not a career politician or diplomat) and hence trained to ask questions, however ugly they are, in order to solve problems. Hence, by training I am a seeker of the truth. This is a necessity for survival in the viciously competitive R&D and hi-tech world.

What got me upset about your good speech was that you mention that no one predicted the Asian Crash of '97. Well, I did (of the '97 crash) and very few people believed me because I am an engineer and not some currently popular stock market guru or economic whizz kid. I predicted this crash as early as 1993/94! But my techniques were primitive then. I have spent about six years at least, full-time, researching into the movement of stocks and economies and market forces. (Several years ago, when the Perodua Kancil was launched, my consumer market model program predicted the Kancil could attain 40% to 60% share of the Malaysian market. This result was shown to someone in that company.) The research is not complete yet but accurate enough to predict general economic trends and performances of individual stocks. I have predicted that the market will go to about 400 - 440 level and may be very much lower, if nothing is done, and I do not expect the economy to recover substantially within the next 12 months.

The question I would like to ask you is that will we actually be an industrial nation? Given my experiences over the last 10 years, I think not, well not by 2020 at least if things carry on as they are. I love research and development and over the six years I spent researching the stock market I proudly admit that I funded my own research. I went to several banks to get a loan an most of them laughed in my face. They said that the stock market cannot be predicted. One bank manager wanted proof that what I was doing will sell before they could loan me some funds. Another gave me his house phone number and asked me to call him at home that evening. Another offered me money to start a coffee shop instead of funds for research in a hi-tech area. Another wanted to show my work to another bank manager of a different bank. Another, over the phone, wanted 'the formula' I used. Another said his brother was looking for something to venture into and would be interested but his own financial institution could not help. I even went to one technology park, who told me that it was very difficult to fund local engineers and they were going to India to higher Indian engineers!

Let me explain what I think was happening with these bank managers. In the case of the first bank manager, she must have just come down from a tree. As any knowledge banker would know that when you run a business or take the risk to invent a product, there is no way to prove before hand that it will sell. You have to work hard at it, sales is not an easy job! The second banker I believe wanted a percentage from the loan, hence the need to call him in the privacy of his house. The third didn't want to take any risks and the fourth didn't have enough knowledge or experience of the hi-tech world to make a decision. The fifth was just plain greedy, stupid and shallow. How many complex mathematical equations can you explain, over the phone, to some one who is highly trained to add, subtract, multiply and divide? If you ask me what I think of those bankers who laughed in my face, I would tell you that I am now laughing at them. Why? The banks didn't actually close down but they were forced to merge due to the current economic climate which they would not or could predict. Now, when the crowd is stampeding into the IT industry, I have left it for more realisable, more fruitful goals elsewhere.

Here in lies some of the keys to our successful industrialisation.

Firstly, a majority of the employees who are actively carrying out serious research, in locally established R&D and hi-tech companies, MUST BE MALAYSIANS and not foreigners. You see, when foreigners go back home, you will have lots of hi-tech companies which are basically four walls and a roof and plenty of paper work to prove they own a technology, but no one understands it or can do anything about it.

Secondly, financial people should not run hi-tech companies. They are just an added burden to an already cash short hi-tech company. Hi-tech companies should be run by engineers and scientist, the people who understand the technology they are developing and the associated difficulties and probable outcomes.

Thirdly, get rid of our bankers. Our financial people haven't a clue about how to fund and manage hi-tech companies. There are plenty in the US who understand the risks and know how to manage such ventures. These are the American venture capitalist and very qualified to do so. You must understand, based upon older US statistics, only 1 out a 100 hi-tech companies past the two year mark and successfully market their products. Yes, the hi-tech industry has a very high failure rate. This may shed some light as to why most banks do not provide overdraft facilities for businesses that are less than two years old.

And lastly, our economy is sound and we will recover. Most financial people will tell you that, our fundamentals are this. or our fundamentals are that. hence this or that is happening. Don't believe them.

Another item you had mentioned in your speech (NST June 4th 1998) was that of the currency turmoil. In the early days of my research into stocks and markets I had noticed and could predicted reasonably confidently, general stock price rises by watching the Ringgit exchange rate fluctuations against the US dollar. Our exchange rate would improve against the dollar before a climb and worsen after a 'crash'. Hence if any of our economist had been tracking the exchange rate trends over the last eight years they could have seen a trend that could have warned us of our exchange rate devaluation months or years in advance. As my research into this area was not conclusive, due to the lack of sufficient data, funds and research assistants, I cannot say, without a doubt, that the mechanism is predictable. But I was expecting a temporary devaluation. The reasons are simple enough. Firstly, as with any product, supply and demand force are at work. This is a very healthy sign of our economy. Secondly, the effect can be modelled by what I like to term as an 'econo-mechanical model' for want of a better term. Let me explain this in simple terms, if one drops a rubber ball it will bounce back up. If one dribbles a basket ball it will always return to the hand of the basketball player. If one drops a blob of plasticine it will fall flat on to the floor. Basically, every thing in nature has a certain degree of resilience and will or will not bounce back or recover from stress or shock due to it's inherent resilience. Economies behave in a similar manner but governments and others (buyers, sellers, .. the public) in authority can change the resilience of an economy by their efforts, by law, by changing spending patterns, by changing interest rates, by changing taxation.etc.

Personally, I believe that most financial people were caught with their pants down because they failed to understand the concept of wealth and its distribution which is different from money. Wealth can be modelled and money is a reflection of the movement of wealth and the work done in acquiring wealth. Hence, in any economy, and especially a free market economy, corruption, nepotism, monopoly, and poor banking systems, devaluation, inflation, heavy taxation. undermine the acquisition and distribution of wealth by making money inefficient.

This article on the 1st letter to PM was reproduced here by Dr. Peter Achutha - 24 December 2017.