The Star: The mystique of national transformation... By TAN SRI LIN SEE-YAN

The mystique of national transformation

By TAN SRI LIN SEE-YAN

The Star, Saturday January 1, 2011

The challenge is to convince stakeholders to buy in and take ownership of the array of programmes.

I am often asked: What is this New Economic Model (NEM) all about; how is this related to the Economic Transformation Programme (ETP) and Government Transformation Programme (GTP); what has all this got to do with creating a high-income society; and what is this middle-income trap we are caught in; and why the urgency for national transformation.

Since the idea of NEM was first mooted by the Prime Minister in mid-2009, our vocabulary has been enriched (or debased) by a barrage of upbeat words (economic roadmap, transformational journey, squeezed-in-the-middle, social minefields, talent management, managed liberalisation, catalysing change, etc.) some of which boggle the mind, and new acronyms (NEAC, GNI, NKEAs, NKRAs, SRIs, EPPs, BOs, 10MP, IEB, Permandu and GOA, Greater KL/KV, etc.).

All enough to confuse most, let alone know what they stand for and to understand the complex web of inter-relationships among them.

No wonder the public seems confused. Many businessmen, investors, civil servants and even academics are not sure they understand enough to lend a deep insight into how the various parts fit together and how they relate to what they are doing. Let alone fully appreciate the whole scheme of things in order to be able to buy in.

After all, the entire framework, strategies and policies and the manner they are stitched together are rather complex. Going through the maze of close to 2,000 pages of inter-related technical reports and discourse, and understanding what they really mean in terms of practical implementation, was rather onerous. Unless stakeholders appreciate enough to buy in and take ownership of the array of programmes, no amount of political will and leadership commitment can see them through in practice. That's the challenge, I guess.

Middle-income trap
It is a fact that middle-income economies (MIEs) have grown less rapidly than either most rich or poor countries which account for the lack of convergence in the past 100 years. So, middle-income nations get squeezed-in-the-middle, between low-wage poor-nation competitors (that dominate in mature or old industries) and rich-country innovators (that dominate new activities based on technological change).
East Asian nations today face this challenge, especially Malaysia and Asean. Economic theory postulates that MIEs face three transformations as they evolve: (i) diversification slackens and then reverses as they get more sophisticated and specialised; (ii) fixed investment assumes less importance as innovation gathers steam; and (iii) quality of education shifts to enable workers to readily absorb new skills and technologies to increasingly add value to the production process.

These are observable outcomes as MIEs successfully shift their growth strategies.

But in the absence of economies of scale, East Asian MIEs will need to struggle uphill in their attempt to maintain previous high growth rates. Strategies based on continuing capital accumulation will deliver steadily worse results. Simply because the law of diminishing returns soon sets in.

Many nations in Latin America and the Middle East are examples of MIEs that have not been able to get out of this middle-income trap.

For East Asia, however, I see room for optimism. World Bank studies have shown that some MIEs in East Asia have successfully made this transition from middle income to rich under proper environments driven by private enterprise, and adopting correct policies. Studies show some MIEs (e.g. South Korea and Taiwan) have remained successful manufacturers even in rather mature industries. Also, China, Taiwan, South Korea and India have shown that success in knowledge-based industries and services can be had. For these MIEs, the tactic has been to straddle both strategies.

Clearly, exploiting economies of scale does offer a way out. The World Bank experience shows “the pattern of trade, the flow of ideas and innovations, the new financial architecture, and the performance of cities are all consistent with East Asian economies displaying a shift towards growth that is founded on economies of scale.”

However, it comes at a price: distributional consequences in terms of rising inequalities, widespread corruption, persistent crime and lack of social cohesion are symptomatic of this model. Be that as it may, transformational change is what is needed if we are to get out of the middle-income trap. There is no other way.

NEM, ETP and GTP
Hence, the NEM for Malaysia. Designed to provide a “concerted, holistic roadmap” to raise income and living standards over the next 10 years, its goals are anchored on strategies outlined in the ETP and GTP. It targets growth in gross national income of at least 6% a year. By 2020, income per capita is expected to reach US$15,000 (RM48,000), enough to become a developed nation.

To achieve this, the ETP identifies eight strategic reform initiatives (SRIs) to propel transformation and growth, namely, promoting a private-sector led economy; creating a quality workforce; instilling competition; strengthening the public sector; building knowledge-base infrastructure; enhancing sources of growth; ensuring growth sustainability through innovation; and implementing transparent and market-friendly affirmative action. Strategically, this makes a lot of sense. But, it's a tall order by any standard.

On the ground, the ETP roadmap identifies 12 National Key Economic Areas (NKEAs) in its drive to maturity these represent growth engines identified to bring about high incomes through constant value adding. They are: oil and energy; financial services; palm oil; wholesale and retail trade; tourism; electrical and electronics; business services, education, communications, content and infrastructure; health tourism; agriculture; and the Greater KL areas.

The ETP needs to be private-sector driven, with Government shifting its role from financier to facilitator. The implementation of the ETP complements the transformational push of SRIs. The outcome is expected to be a more balanced and more sustainable economy. Bear in mind that SRIs are intended to deal with foundational economic issues underpinning transformation and growth.

However, success of the ETP rests on four key underlying thrusts. The first involves the creation of an innovative and creative culture. To thrive, this needs an ecosystem that inculcates private enterprise and risk-taking which flourish best in a competitive and regulatory-friendly environment.

The second addresses the presence of a reliable flow of quality workforce incubating in a conducive workplace.

The third deals with a revamped Government able to transform its service delivery system. This requires a Government “embedded” in support of private initiatives, but not “in bed” with investors.
Only a quality civil service instilled with fiscal discipline can deliver this.

And the fourth tackles the issue of inclusiveness and the need to reduce disparity often collateral damage from unfettered laissez faire private participation, in the absence of checks and balances. This thrust is critical for social cohesion in the face of a strong push for growth. For without growth, there will not be enough to redistribute.

The GTP in conjunction with the ETP form an integral part of the NEM. The GTP is intended as the implementation roadmap to improve performance of the government engine. Here, six National Key Result Areas (NKRAs) have been identified as critical: reducing crime; fighting corruption; transforming education; reducing poverty; improving rural infrastructure; and providing modern urban public transportation.

To me, as a matter of priority, early outcomes must be measured against the goal of zero tolerance of corruption and crime, and building a modern education system. To retain talent and to attract more, you need to transform the fight against corruption and crime in order to create liveable cities to act as “talent magnets” which are open, tolerant, safe and liberal with attractive living lifestyles.

A lesson from history
European renaissance started first in Italy in the 15th century. It rapidly spread to western and central Europe. Outcomes were centred on (a) absorption of knowledge (mathematics) from India and Arabia; (b) notion of good living; and (c) rapid transmission of ideas through the advent of printing. But undesirable social conditions (poverty, strife and corruption) deteriorated in the midst of a golden age of plenty. What's happening in East Asia mirrors the renaissance swift absorption of knowledge from the United States and Europe, focus of living well now, and widespread dissemination of ideas emanating from information and communications technology and the computer. The lesson is clear: transformational changes must be accompanied by greater social cohesion to avoid problems from the worsening of social maladies.

Important how the public feels'
The Prime Minister declared that success of the ambitious blueprint hinges on its effective implementation: “Execution needs to be flawless.” As I see it, discernable progress in four areas of priority concern to the rakyat and investors needs to come early enough to build confidence. They are corruption, crime, education and private enterprise.

It is not enough to show that in the first nine months of 2010, crime fell by 16% (but still have 132,355 unresolved reported cases) and street crimes fell 38% (18,299 unresolved reported cases) or that 648 people were arrested for corruption.

The public and investors (with ears on the ground) have to “feel” any improvement. Raw and biased statistics cannot tell the real story, and don't impress. At this time, it would appear the rakyat and investors don't “feel” any material improvement in the crime and corruption situation. That matters. But they don't rush to judgement. What they want to “feel” is for today to be better than yesterday, and tomorrow to be better than today; and come tomorrow, their expectations are fulfilled.

Incidents from personal experience reinforce this. Damansara Heights (DH) is rated as a top spot to work and live in greater KL. I stay there and my office is in nearby busy Plaza Damansara. Last week my car was parked three doors away from my office, and within 10 minutes (no joke) the car was gone stolen (sophisticated anti-theft gadgets didn't help).

Although a police pondok is nearby, I still had to go to report at a police station far away and took altogether three hours just to get a police statement taken. Many more steps still have to be made before I can file an insurance claim. That's another story. Because my car was a popular brand, we were told that four such cars were stolen in DH in recent days.

Not so long ago, my associated office in DH was broken into and computers were stolen. When friends and neighbours learnt of my predicament, I had an earful of equally unfortunate incidents nearby, including muggings, holdups and handbag snatching. The point is simple: crime remains a problem of serious concern, even in the most liveable area in KL. People and investors just don't “feel” safe whatever the data may show.

Human capital and innovation
Key to NEM's success is ready availability of quality human resources. At its foundation is the education system and how it can be made to deliver. So far, none of the SRIs, NKEAs and NKRAs points to confidence that this will be done comprehensively any time soon.

Time is of the essence. The competition for talent is getting more intense worldwide. Bear in mind it takes at least a generation to finish one cycle of “production”.

On math, reading and science tests given to 15-year-olds in 65 countries in 2009, Shanghai teenagers topped all three worldwide. Near the top were: Singapore, Taipei, Finland, South Korea and Japan. Malaysia was not on the radar screen. The United States was, once again, in the middle of the pack in science and reading, but below average in math.

The Organisation for Economic Cooperation and Development (which runs these tests) attributed Shanghai's success to being a “leader in reform”, citing the city's near universal education system, its competitiveness in admissions, high level of student engagement, modern assessment system, ambitious curriculum, and a programme to assist weak schools. Until now, China has not even surfaced as a threat!

Human capital lies at the core of innovation and the taking of risks. Raising productivity requires a labour force of high calibre committed, motivated and skilled enough to drive transformational change based on excellence over the long term. Only private initiative can deliver this. Lest we forget, there is a big difference between incremental improvements and transformational change.

French President Nicolas Sarkozy says it best: Invention of the light bulb did not come about from incremental improvements to the candle. Make no mistake, transformational changes necessarily involve the taking of risks.

Tom Watson (founder of IBM) once said: If you want to succeed, raise your error rate. As I see it, a government that takes no risk in promoting innovation is one that is likely to make the bigger error of not trying hard enough. Getting private initiative back as the engine of growth is hard but critical.
Bold steps need to be taken. Incremental changes like getting government-linked companies (GLCs) to sell down equity, etc. won't get us there. Private investors need to get their Schumpeterian “animal spirits” fired up enough to squeeze out their entrepreneurial juices.

To be serious, the Government needs to get out of the business of doing business. GLCs and other federal and state enterprises are unfair competition. They only work to hold back the prompt re-emergence of real private initiative.

I should end with a quotation from my favourite poet, E.E. Cummings:

America makes prodigious mistakes,

America has colossal faults, but one thing cannot be denied:

America is always on the move.

She may be going to hell, of course, but at least she isn't standing still.

This is no time to stand still in undertaking bold transformational change. In the end, that's what statesmanship is all about.

Former banker Tan Sri Dr Lin See-Yan is a Harvard-educated economist and a British Chartered Scientist who now spends time writing, teaching and promoting the public interest.

TMI: Beyond the economics of merit... By Kapil Sethi

Beyond the economics of merit

By Kapil Sethi

TMI: November 08, 2010

NOV 8 — A new Talent Corporation is to be set up to reverse brain drain. Lots of glitzy new infrastructure projects will be implemented under the ETP. A slew of performance benchmarks will ensure that there are no goof-ups at the implementation stage. All this and more is supposed to move us out of the middle-income trap into a high-growth, high-income trajectory to become developed by 2020.

Are these pipe dreams or an achievable vision of the future? Economic models and projections are just that — models and projections based on hard data. Life,on the other hand, has a peculiar habit of intervening at the most inopportune time to turn the so-called future on its head. It’s called the human factor.

In all kinds of collective human endeavour, for any project to succeed, clear ambition and an even clearer unity of purpose are prerequisites. We have to want to put up a theatre production, and everyone has to play their appointed parts in synchronicity for it to be a success. A corporation has to be hungry for new business, and the sales team has to play their parts to perfection in a pitch to the prospective client for the company to be successful. Even for wars to be prosecuted successfully, a clear enemy and a committed military operating as one are essential.

In our case, the ambition to be a developed nation by 2020 is clear and has been for a while now. Where it breaks down is in the unity of purpose. We all want to be rich, but insist that other races in the country are impeding our path.

Is following the NEP for another 10 years the way to do it? Is emphasising merit also racist, as implied by a senior statesman recently? Does the current government know best and should we give them a chance? Is throwing money after it the solution? Or is using predictive economics the way to go?

It might be worthwhile to step back and understand why we are unable to derive a consensus on how to approach the issue.

In front of a global audience, we are able to forget race. We claim ownership of Lee Chong Wei, Shalin Zulkifli and Nicol David equally proudly. When we visit a nasi lemak stall in London, we introduce it to Mat Sallehs as a Malaysian, not Malay dish. In business especially in the private sector, we treat each other as colleagues in task accomplishment. Love increasingly has no boundaries.

It is actually only in situations that we are surrounded primarily by people of our race that we play up the perceived differences between us. It is after all a very fundamental social characteristic to protect the ones closest to us and repel all others who are identified as the other.

But in the context of our economic ambitions, emphasis on race is a hindrance because it frames the definition of “us” very narrowly, and the “other” too widely. If we aggregate the strengths of all of us, Malaysia has to compete with the rest of the world. But if we emphasise the strengths of only a race, then we have to first compete with other races before competing with the rest of the world.

Whatever be their other shortcomings, the current crop of politicians have not been slow to recognise this. When it comes down to it, both coalitions before deciding which candidate to put up for elections look at “winnability” — a peculiar amalgam of the ethnic composition of the electorate, the loyalty of the candidate to the party, his personality and positions on issues, even her smile.

The appeal of the prospective candidate has to generally go beyond race today. The wider the definition of “us”, the greater the winnability of the candidate. As we have witnessed in several by-elections, once the decision is made and there is grassroots acceptance of the winnability of the candidate, there appears a unity of purpose in the ranks and momentum can be shifted, a no-hoper made a serious contender and vice versa.

This is not to say that we should just bury our racial differences, but in a hyper competitive world we need to widen our definition of “us” in our public lives to accommodate all Malaysians so we can achieve our economic ambitions. This is why the call for a merit- and needs-based model for the future is more in consonance with our ambition than a race-based model.

Expansion of educational and workplace opportunities on the basis of merit and/or economic needs does not need to diminish our racial identity, it just aligns our skillsets to the economic realities of the world. In today’s world, affirmative action needs to support every citizen’s right to opportunity, unhindered by a lack of means.

Race has its place in our private and social lives, but if we want to achieve our economic goals, it should not have any place in school, not in sport and certainly not in business. Race and merit need to co-exist, not compete. Our ambitions need to be aided with an even clearer unity of purpose.

At home though, surrounded by people of my own kind you can always find me with a bottle of whisky in my hand loudly denouncing all those who call us alcoholics.

Kapil is an advertising strategist turned brand consultant based in KL, who likes nothing better than to figure out why people behave the way they do. Naturally this forces him to spend most of his time lounging in coffeeshops and bars. He can be reached at kapilanski@yahoo.com 

malaysiakini: Conquer fear? Yes, we can... by Josh Hong

Conquer fear? Yes, we can

Josh Hong
malaysiakini, Oct 1, 10
1:27pm

In rolling out the Economic Transformation Programme (ETP), encompassing a great variety of projects totaling US$44 billion, Prime Minister Najib Abdul Razak is pinning his hopes on securing an electoral victory over the opposition with impressive economic performance.

But would any economy in the world achieve transformation without deep-rooted reform? I am afraid not.

In fact, the experiences of the developed nations strongly indicate several key factors in sustainable economic growth: openness to the world economy, extensive freedom of private business, stable and efficient regulations (including well-defined property and intellectual property rights), considerable infrastructure investments, a competent, professional and honest public administration, strong commitment in human capital, as well as a vibrant civil society.

As Najib celebrates the 18th month of his government this weekend, the public is yet to hear about root-and-branch reforms in the judiciary, police, bureaucracy, press and media and, of course, the political sector.

Instead of feeding the people with dazzling but unrealistic figures and statistics, the government will do well to spell out concrete measures - if any - to root out corruption, improve public integrity and enhance transparency. Any attempt at China's Great Leap Forward will likely end in bitter disappointment at best and catastrophic failure at worst.

Recent developments show that the government may on one hand be trying doubly hard to prove that it does have in mind a gigantic economic pie to keep everyone satisfied, it is also seeking to tighten up control over the public on the other.

Of late, there has been a series of blatant assaults on voices and views that do not go down well with the powers-that-be, the latest casualties being Zunar, the popular cartoonist who was briefly detained last week, and Kim Quek, whose title The March To Putrajaya is now officially banned. The government's weird and desperate acts have got Zunar and many wondering if one, under Najib's 1Malaysia, now needs a licence even to laugh.

Umno's politicking is so intense and its attacks so profane that they have prompted one Hata Wahari to brave the potential reprisal by urging both the government and the top management of Utusan Malaysia to stop exploiting the Malay daily as a political tool.

Nearly five decades to the year when the once progressive Malay nationalist newspaper was forcibly taken over by Umno amid much public outcry and protest, a conscientious voice that resembles that of the fearless Said Zahari is finally heard, however feeble it may sound.

Writing already on the wall

Like it or not, the end of the Barisan Nasional era is nigh. Even if it does not happen at the next general election, the writing is already on the wall. The strange emergence of Perkasa cannot be more ominous. In failing to distance itself from the ultra-Malay group, Umno is alienating non-Malays, with the MCA, MIC and Gerakan being among those hit by collateral damage.

Even moderate and fair-minded Malays will be alarmed by the incivility pervasive among Perkasa members, whose abusive language and vulgarity have outdone Namewee's poor taste. Both Perkasa and Namewee can now go back conceited, safe in the knowledge that they have strengthened their respective support bases.

All this is part and parcel of Umno's cunning plan to strike great fears in the public, for no authoritarian government will take defeat lying down, especially when so much vested interest is at stake.

Knowing that all the dodgy deals and mega scandals have widened the trust deficit between the people and itself, the BN government has no option but to do its utmost to ensure minimal punishment at the ballot box, hence the paradoxical combination of economic hopes and political fears.

Whether the oft-used tactic will work is dependent on us. Malaysians must remember our dreams will be blocked or even shattered if we allow our fear to grow bigger than our faith in creating a peaceful and trustful society.

Fear makes strangers of people who would otherwise be friends. For years, Malaysians of all races have been frightened into thinking the other party would never understand us, so we choose not to talk directly to avoid unpleasantness. But are Malaysians really so immature in handling differences that we must constantly look to the government for guidance?

The Germans cannot have put it more succinctly: fear makes the wolf bigger than it is (Angst macht den Wolf größer, als er ist), so the onus is on us to reject BN's politics of intimidation and bullying. National life is nothing if it is based on fear, rather than genuine hopes and understandings.

It is either that we rise up and overcome the fear, or wait to be devoured by it. What do you think the authorities can do if thousands of people take to the streets to protest against the government's inertia in institutional reforms across the board? Put us all behind bars?


JOSH HONG studied politics at London Metropolitan University and the School of Oriental and African Studies, University of London. A keen watcher of domestic and international politics, he longs for a day when Malaysians will learn and master the art of self-mockery, and enjoy life to the full in spite of politicians.

TMI: Investment won’t return without reforms, says economist... By Yow Hong Chieh

Investment won’t return without reforms, says economist

By Yow Hong Chieh

The Malaysian Insider, October 04, 2010

KUALA LUMPUR, Oct 4 — The Najib administration needs to show the business community it has enough political will to carry out reforms under the New Economic Model (NEM) before investors will consider putting their money here again, a top regional economist said.
Citing capital outflow numbers, DSG Asia chief executive Dr Simon Ogus said foreign and local investors remain unconvinced the government has what it takes to turn Malaysia around, despite the NEM and an ample supply of “smart people” in the country who know what has to be done.

“Do you think Umno recognises that it has to change? It’s not an economic question, it’s a political question,” he told The Malaysian Insider at the Megatrends Forum 2010 organised by Khazanah Nasional here today.

“The business community’s not buying into it yet. If we see those numbers starting to turn around, then you will basically know that there’s follow-through... The numbers show that there’s massive capital outflow,” he said, adding that there has also been a net outflow of foreign direct investment (FDI) in the past three years.

Ogus also downplayed foreign direct investment (FDI), saying it was more important for Malaysia to chase long-term investment from domestic players rather than short-term capital from foreign ones to help raise growth rates.

His views echoed those of former prime minister Tun Dr Mahathir Mohamad, who recently said Malaysia should concentrate on domestic investment if it wanted to achieve Vision 2020, Malaysia’s
blueprint for achieving developed nation status by 2020.

At a CEO forum organised by the Perdana Leadership Foundation last week, Dr Mahathir had urged the Najib administration to abandon its policy of chasing FDI as Malaysia now faced too much competition from “much more attractive” regional rivals, and to instead give a leg up to local companies with the potential to be world-beaters.

“Forget foreigners. The foreigners are the cream on the top of the coffee.

“You’ve got to pursue your own domestic investors to commit to the country — that means live in the country, work in the country, invest in the country, educate their children in the country — and then you import best-of-practice techniques and people from overseas to bring up the human capital,” Ogus said.

The Hong Kong-based economist cautioned that potential growth would be limited if capital was not fully employed, and pointed out that Malaysia’s current account surplus was strong only because there was no investment in the domestic economy.

Ogus explained that increased investment, together with changes in population, was the basis for economic expansion, and said insufficient domestic investment had been responsible for pulling down Malaysia’s growth rates over the past 10 years.

Local companies have increasingly put their money overseas in recent years, while foregoing domestic investments. Malaysian companies invested a net total of US$8.2 billion (RM25.4 billion) abroad in 2009, according to the Unctad World Investment Report (WIR) 2010.

Government officials have downplayed this, arguing that capital outflow only meant Malaysian companies were now more integrated into the regional economy.

The Najib administration is depending on private sector investments to drive the 10th Malaysia Plan (10MP) and has set for it a growth target of 12.8 per cent a year, or RM115 billion annually, for the next five years.

The government has redoubled efforts to attract FDI back into the country, while trying to entice domestic companies to invest in Economic Transformation Plan (ETP) projects worth US$523 billion.

malaysiakini: Whither the reforms in the ETP?... by Nurul Izzah Anwar

Whither the reforms in the ETP?

Nurul Izzah Anwar
Sep 22, 10
3:03pm

 

MP SPEAKS 

The government has recently announced the launching of the Economic Transformation Programme or ETP which is part of the New Economic Model (NEM) on Sept 21.

I congratulate the government for introducing a comprehensive economic development plan that aims to position Malaysia as a high-income economy by 2020.

However, I wish to ask a few questions from a layperson's understanding of the economy to seek clarification on the eventual implementation of the plan and to obtain answers to the many challenges and contradictions facing us today.

Gross National Income (GNI) projections

Overall, the country's GNI is projected to grow to at least RM 1.7 trillion (US$523 billion) from RM660 billion (US$188 billion) in 2009 (using RM3.25 to US$1 exchange rate) for a 178% growth over 10 years (2010-2020).

What is the impact to the GNI projections if the Ringgit weakens to RM3.50 and above per US$1?

Will floating the ringgit help in meeting the exchange rate needed to achieve the GNI targets?

6% annual growth rate target

This would require a 6% annual growth rate for 10 years (2010-2020). However, from 2000 until 2010, Malaysia's average annual GDP Growth was 4.72%.

How are we going to maintain a 6% annual growth rate for the next 10 years with the predicted global economy remaining weak as compared to the preceding 10 year annual average of 4.72% when the global economy was relatively strong (except for the 2008 financial meltdown)?

ETP's GNI growth contribution target

The ETP projects will provide RM1.258 trillion (US$387 billion) or 74% of the country's GNI of RM 1.7 trillion (US$523 billion) by 2020. The remaining 26% is expected to come from non-ETP project sectors.

The ETP projects are part of the 11 NKEAs. The four largest NKEAs (oil, gas and energy, financial services, palm oil and wholesale and retail) are projected to generate 60% of the 78% ETP based projects incremental GNI growth from the 11 NKEA sectors.

What will be the impact on GNI targets if commodity prices (oil, gas, energy, palm oil) that are the two main NKEAs become lower during the 10 year ETP period?

GNI per capita target

GNI per capita will reach above RM48,000 by 2020 from RM23,700 in 2009, for an increase of 102% over ten years. For context, the income distribution schedule indicates that there are 5.8 million households in 2007. Of that, 8.6% have an monthly income below RM1,000, 29.4% had between RM1,000 and RM2,000, while 19.8% earned between RM2,001 and RM3,000; 12.9% of the households earned between RM3,001 and RM4,000 and 8.6% between RM4,001 and RM5,000. Finally, around 15.8% of the households have an income of between RM5,001 and RM10,000 and 4.9% have an income of RM10,000 and above.

Furthermore, increased GNI per capita should take into account the real cost of living situation faced by ordinary Malaysians.

In the 1970s a car may cost only RM7,000 but today it is at least RM45,000. A comfortable house in the 1970s may cost RM50,000 compared to today's RM350,000. A basic meal in the 1970s may cost RM1 but it is RM5 now. And the starting salary in the 1970s would be RM1,200 compared to RM2,000 today. And it can be assumed that even with the doubling or tripling of average salaries by 2020, the cost of the above items may have also doubled or even tripled likewise due to inflation.

ETP workforce requirement

ETP will create 3.3 million new 'middle class' jobs, of which half will require diploma or vocational qualifications. However, we can find that the quality of our workforce is based on the following characteristics:

• 30% of Malaysians obtained higher education qualifications (2005), compared to Singapore's 46%, Thailand's 41% and South Korea's 89%;

• 80% of our workforce have only received secondary level (SPM) education (2007);

• Only 25% of our workers are high skilled (2007), compared to Singapore where 49% are highly-skilled, Taiwan 33% and South Korea's 35%;

• Workforce productivity for Malaysian labour is an average of 2.9% (1998-2007), compared to China's 9.2%, India's 4.4%, Thailand 3.1% and Indonesia's 3% labour productivity for the same period.

The low quality of our workforce is compounded by:

• Inefficient education services delivery: In 2007, the percentage of Malaysia education expenditure as % of GDP was a high 4.5%, compared to the Philippines' 2.6%, Singapore's 2.8%, Hong Kong's 3.3% and South Korea's 4.2%.

• Rising tertiary education costs, lower education quality: Malaysia has 20 public universities and 627 institutes of higher learning. Under the 10MP, selected public universities will be corporatised and combined with private institutions of higher learning, the fee-paying structure will see fees increase from an average of RM10,000 to RM50,000 per student and it is projected that 90% of tertiary education students will enrol not in public but private institutions.

This makes accessibility and affordability for quality education (only 4% of private institutions compared to 33% of public institution's academic staff has a PhD) a challenge in producing an educated workforce.

Furthermore, with 70% of public institutions' enrolment made up of bumiputeras while 95% of private institutions enrolment are non-bumiputeras, unless more proactive measures are taken, such as more scholarships (not PTPTN loans) and drastic investments along with improvements in primary and secondary education are taken, racial disparity in education will create its own set of challenges.

ETP's innovation key success factor

Innovation is one of the most critical factors to move up the economic value-chain and escape the 'middle income trap'.

However, Malaysia currently has a low research and development (R&D) capacity based on the following statistics:

• 2006 World Bank data indicates that Malaysia's R&D expenditure was 0.6 % of GDP, compared to South Korea's 3.2%, Singapore's 2.3%, Australia's 2.2% and China's 1.4%. Malaysia has a lot more to do to prioritise its spending.

• Based on the number of R&D researchers per million population, Malaysia had 372 researchers per million population. While South Korea had 4,187 per million, Singapore had 5,736, Australia 4,231 and China 927 per million population. Malaysia has to prioritise its human capital development.

ETP investment targets

The ETP requires investments worth RM1.376 trillion (US$444 billion) over 10 years (2010-2020) for the following projects:

• 133 Entry Point Projects (EPPs)

• 60 Business Opportunities (BOs)

The total investments sources are:

• 60 percent private sector or RM825.6 billion

• 32 percent government-linked companies or RM440.32 billion

• 8 percent government or RM96 billion

However, these targets are challenging by the following facts:

• In the past 10 years, private companies invested just RM535 billion. Malaysia's private investment rate of around 10% of GDP is among the lowest in Asia;

• The World Foreign Investment Report (WIR) 2010 showed that FDI in Malaysia plunged 81 percent last year, trailing behind the Philippines, Vietnam, Thailand, Indonesia and Singapore. The Philippines attracted US$1.95 billion (RM6.24 billion) in FDI compared to Malaysia's US$1.38 billion, while Singapore received more than US$16 billion.

• National debt has reached 53% of GDP which is an unsustainable level. According to Idris Jala the government debt stands at RM362 billion and rising, and may reach RM1.158 trillion by 2019 with the possibility that Malaysia may go bankrupt like Greece.

Who are the real beneficiaries of the ETP and NEM?

Based on our past 'national expenditure pricing' experience, could we assume that the following breakdown of the total investment amount of RM1.376 trillion (RM 1,376,000,000,000,000) will be as follows: Legal fees: (2%) RM27.52 billion; consultancy fees (8%) RM110.08billion; facilitation fees (10%) RM137.6 billion; overpricing costs (30%) RM 412.8 billion

Does this mean that the total fees and costs payable of RM 688 billion or 50% of the investment total is to be considered as a normal economic leakage, leaving the remaining 50% to actually be invested in the ETP projects?

Who will ETP's burdens fall on?

If the RM 1.376 trillion ETP investment amount requires a return on investment of 10%, then annually after 2011, the ETPs need profits-after-tax of RM137 billion. Based on a 20% profit margin, this means the entire entry point projects and business opportunities entities must generate RM685 billion in annual gross revenues.

Does this mean in 2020, the 30 million Malaysians must spend at least 80% (with the balance 20% being spending by foreigners as tourist or as importers) - which would be RM22,933 per capita, that is, 47% of the RM48,750 high-income GNI per capita target - to meet the ETP's gross revenue needs of RM685 billion annually just to remain viable?

What about a political reformation programme?

It would appear from this enquiry that the rewards for the ETP will benefit the few while the risk and true cost as always will be shared by the rakyat.

As I said earlier, that the government's comprehensive economic development plan is commendable BUT if the government is sincere in making it a reality to benefit all Malaysians, then immediately, a fifth pillar to the National Transformation Agenda must be added which is a Political Reformation Plan (PRP) which would also be the 'Political Contract' that complements the 'Social Contract' of our country.

The Political Reformation Plan or 'Political Contract' would include repealing all anti-democratic laws, respecting separation of powers, reforming national elections and restoring local government elections, returning the judiciary's and other state institution's independence, fighting corruption, ensuring a free media and by abiding to the true meaning of our constitution, then and only then, will the economic transformation plan become a resounding success for a Better Malaysia.

Isn't that so? Hidup Malaysia!


NURUL IZZAH ANWAR is the MP for Lembah Pantai.

Malaysian Insider: ETP: Malaysia to kickstart private investment

Malaysia to kickstart private investment

Malaysian Insider, September 21, 2010

 

KUALA LUMPUR, Sept 21 — Malaysia today outlined ambitious plans to double its national income (GNI) by stimulating US$444 billion (RM1.38 trillion) of investments over the next 10 years, mostly from the private sector.

A government think-tank has identified 133 projects with investments worth US$444 billion, of which 92 per cent will come from the private sector.

Private firms will invest US$266 billion or 60 per cent, government-linked companies US$144 billion or 32 per cent, and the public sector US$34 billion or 8 per cent. Seven projects worth US$37 billion are ready to go now with a “named investor and serious commitment”, according to Idris Jala, the head of the Performance Management and Delivery Unit.

Following are the key sectors:

OIL AND GAS: It will see investments of RM218 billion over the next 10 years, starting with liquefied natural gas facilities in peninsular Malaysia by 2013. A 10-million tonne regional oil storage hub will be built in Johor state, next to Singapore, by 2015 to turn Malaysia-Singapore into an Amsterdam-Rotterdam-Antwerp type hub.

By 2017, Malaysia will be the number one oil services hub in Asia and by 2020, there will be 5 gigawatts (GW) of hydro capacity, 1.25GW of solar and a nuclear plant.

PALM OIL: It will see investments worth RM124 billion by 2020. This will help boost fresh fruit bunch yields to 23 pe rcent from 20.5 percent and there will be a move into oleochemicals and more downstream industry. This will be led by Sime Darby, IOI, Kuala Lumpur Kepong and state plantations agency Felda.

FINANCIAL SERVICES: This will see investments worth RM211 billion, mainly through leveraging Malaysia’s lead in Islamic finance to target markets like Turkey, Indonesia and Egypt.

KUALA LUMPUR: The city will see investments worth RM172 billion, mainly in the Kuala Lumpur Mass Transit which includes 141km of tunnels built in the largest infrastructure project in Malaysia.

TOURISM: It will see investments worth RM204 billion with plans to join up Kuala Lumpur’s shopping malls in an Singapore “Orchard Road” type development using walkways. There will be a “Malaysia Truly Asia” cultural centre to pull in the tourist dollar with “Broadway quality” traditional song and dance.

ELECTRICAL AND ELECTRONICS: It will see investments worth RM78 billion. Malaysia plans to become the world’s second largest solar panel maker by 2020 and to boost semiconductors, LEDs and industrial electronics.

AGRICULTURE requires RM22 billion in investment.

HEALTH will see RM23 billion of investments and will see a Kuala Lumpur suburb become a “health metropolis”.

RETAIL AND WHOLESALE will see investments of RM255 billion.

CREATIVE INDUSTRIES will add RM51 billion in investment.

EDUCATION will see RM20 billion in investment.

BUSINESS SERVICES will see RM41 billion invested. — Reuters

malaysiakini: Massive RM1.4 trillion investment plans unveiled, ETP... by Royce Cheah

Massive RM1.4 trillion investment plans unveiled

Royce Cheah
Sep 21, 10
12:21pm

Malaysia on Tuesday unveiled ambitious plans to boost its economy by mobilising hundreds of billions of dollars of private investment, although questions remained over whether the money would materialise.

The plans ranged from a new mass transit system to relieve congestion in the capital, Kuala Lumpur, to building a huge oil storage facility next to neighbouring Singapore to form a regional oil products trading hub.

A government thinktank said it had identified investments worth RM1.376 trillion (US$444 billion) over 10 years, of which 60 percent would come from the private sector, 32 percent from government-linked companies and 8 percent from government.

The investment aims to double per capita income and push Malaysia into the ranks of "developed" nations by 2020, rebalancing Asia's third most export-driven economy towards domestic demand and the service sector.

These numbers 'pie in the sky'

"The plan does not provide a clear sense of where the money is coming from. A lot of these numbers are pie in the sky," said Bridget Welsh, a Malaysia specialist at Singapore Management University.

Malaysia is competing for investment with other fast-growing countries in Southeast Asia and neighbouring Indonesia recently unveiled plans to boost infrastructure too.

In the past 10 years, private companies invested just RM535 billion (US$172.4 billion), according to official data and Malaysia's private investment rate of around 10 percent of gross domestic product (GDP) is among the lowest in Asia and a third the level it was before the 1998 Asian financial crisis.

The government, which in 2009 ran its biggest budget deficit in 20 years as a percentage of GDP, contributes around half the investment in Malaysia and the minister in charge of presenting the investment plans said the new targets were credible.

"I don't think the government would publish a document that thick if there is no political will. It's a risky strategy to expose yourself so publicly when you have no plan to do it," Idris Jala told a public presentation on the plans.

The plan relies heavily on domestic capital as foreign direct investment in this country which in the early 1990s accounted for almost 40 percent of the Southeast Asian total accounted for just 3.8 percent in 2009, according to United Nations data.

Malaysian companies like leading bank CIMB and telco Axiata have started building a regional presence in large, fast growing countries, such as Indonesia.

Economists warned without a new policy framework to encourage investment the Malaysian plans would be hard to realise.

"It will be difficult to achieve the private investment growth target set by the government if there are no additional tax incentives given to the focus sectors," said Gundy Cahyadi, regional economist at investment bank OCBC.

New jobs would be 'middle-class'

The plans aim to create another 3.3 million jobs by 2020, many in the high-value service sectors such as Islamic finance. Idris said 46 percent of the new jobs would be "middle-class".

Despite churning out tens of thousands of graduates, Malaysia's education system has failed to deliver and is becoming increasingly polarised by arguments over language between the majority Malay population and minorities such as the large ethnic Chinese population.

The government thinktank that designed today's investment plan said that in 2003 Malaysia had just 21,000 finance and accounting professionals qualified to be employed by multi-national companies compared with 341,000 in India and 127,000 in the Philippines.

"How can you create middle-class jobs when you do not have an education system that works," said Singapore Management University's Welsh.

There is also policy risk in Malaysia. Recent plans for a radical overhaul of the country's costly subsidy regime proposed by the same thinktank that outlined the investment plans were shot down by government politicians who feared unpopularity.

(Additional reporting by Razak Ahmad)

- Reuters