PM Najib’s Grand Plan Under Scrutiny

30.03.2012

The first report card on Malaysia’s ambitious program to kickstart its economy will be out next week, and the government hopes it will blunt criticisms that the plan is no more than a series of government-funded mega projects.
The report card is produced by the same people who are running the program, and is likely to be glowing.
The Economic Transformation Programme (ETP) was unveiled in October 2010 and is one of the most important policies of the administration of Prime Minister Najib Razak. He is banking on it to turn around the economy and deliver political support for the ruling Barisan Nasional.
Political analyst Wan Saiful Wan Jan, from the libertarian think-tank Ideas, noted that Datuk Seri Najib forged ahead without buy-in from his Umno party.
“It is, thus, important for him to get it right,” he said.
The economy has become one of the most pressing political issues in recent years as wages stagnate due to the country’s over-reliance on low-cost labor.
The ETP aims to double per capita income to RM48,000 ($15,620) by 2020, with growth driven by the private sector. But some economists have questioned the numbers behind the ETP.
While some projects under the ETP may be a catalyst for higher-value development, many more are actually old projects announced years ago, noted Azrul Azwar, chief economist at Bank Islam. “It is hard to see how these old projects can suddenly become transformational,” he said. The bulk of the investments are from the government or government-linked corporations, which are often not market-driven.
But it is a detailed report by a think-tank, called Research for Social Advancement (Refsa), that has poked the most holes in the ETP’s projections. The projections were drafted by the government’s high-level Performance Management and Delivery Unit (Pemandu).
“The ETP is just business-as-usual, dressed up in fancy presentations and long press releases,” said Teh Chi-Chang, an economic analyst who is executive director of Refsa and co-author of the six-part critique. The first part was released in mid-January and the final part earlier this month.

Pemandu has sought to rebut the criticism in its blog but has indicated that it will let its report card do the talking.
Pemandu chief executive Idris Jala, a respected corporate leader who joined the government to spearhead the program, told the state news agency Bernama recently that the ETP has surpassed most of its first-year targets, including the creation of more than 500,000 jobs and a gross national income of almost RM850 billion.
But, Teh said, shorn of the glitter, the ETP is still about government-driven mega projects that benefit well-connected businessmen, and does little to address income inequality.
“Even if Pemandu achieves all that it sets out to do, the Malaysian economy will be unbalanced and not sustainable. The ETP is not going to build a middle class that will keep Malaysia going,” he said.
The critique noted that the bulk of the investments still came from the government, and were focused in the oil and gas sector.
It said two government projects — the Mass Rail Transit in Kuala Lumpur and Petronas’ petrochemical refinery in Johor — account for a whopping 55 percent of the total investments of RM176 billion in the first year. More than half of the investments pledged are in oil and gas.
In addition, it pointed out that in the first year, the government and government-linked corporations had invested RM114 billion, almost double the RM62 billion pledged by the private sector. The private sector share is just 35 percent, instead of 60 percent as targeted.
Refsa also argued that while national income will go up, only 21 percent will go to wage-earners — which is lower than the current 28 percent. The rest of it will go to corporations. Income inequality will only grow, it added.
Pemandu denied some of these criticisms through its blog, saying that while the private sector involvement may appear low, its data merely represents a ‘snapshot of progress’ and does not cover the entire range of investments.
It said overall private investment had risen by 19.4 percent from 2010 to RM94 billion last year.
Pemandu also said contrary to Refsa’s claims, its own estimates show that 45 per cent of the workforce will take home 51.1 percent of the total wages by 2020, making a significant redistribution of income. “The ETP Roadmap, as we have always maintained, is a kickstart and it will evolve as we build out the program,” it said.

Who wins the war of words is important, with elections looming.
Wan Saiful believed that the ETP is a vote-getter, especially in the rural areas where many people view it as a government programme to improve their lives.
“Generally, the ETP is being taken positively,” he said