In his first budget, the 2010 budget, presented to Parliament last Friday, the Prime Minister and Finance Minister, Datuk Seri Najib Razak claimed that he is laying the foundation for the development of a new economic model to become a high-income economy.
He stressed that the new economic model must be based on innovation, creativity and high-value added activities so that Malaysian can remain relevant in a competitive global economy.
Najib announced that his government “will transform Malaysia through a comprehensive innovation process, comprising innovation in public and private sector governance, societal innovation, urban innovation, rural innovation, corporate innovation, industrial innovation, education innovation, healthcare innovation, transport innovation, social safety net innovation and branding innovation.”
So far, Najib’s most successful innovation in his First Two Hundred Days is “branding innovation”, as never before has a Prime Minister’s slogan, “1Malaysia”, been promoted so blatantly, not only during by-elections but there is even a 1Malaysia Toilet in Terengganu, putting the previous Prime Minister’s slogan of “Islam Hadhari” to shame – all thanks to the tens of millions of ringgit spent on public relations companies, in particular the US-based Apco Worldwide PR firm to promote the new Najib brand at public expense.
As for “innovation” in other important sectors of national life, Najib has got very little to show.
Najib said the focus of his budget will be on the well-being of the rakyat, with particular emphasis on advancing the role of the private sector as the driver of economic growth and developing high-skilled human capital and enhancing the efficiency of the public service.
This is nothing new as it is said in every budget speech in Parliament as far as I can remember, but they have not been able to stop the significant decline of private investment to below 10 per cent of GDP, with total domestic direct investment decreasing from RM72 billion in 1997 to RM56 billion in 2008, while total net foreign direct investment (FDI) plunged from RM19.7 billion to RM3.6 billion.
Najib should end the 50-year New Economic Policy if he wants to lay claim to innovation or shift to a new economic model as the NEP had stunted Malaysia’s economic growth and prevented the nation from becoming a high-income country.
Although Najib acknowledged the dire choice faced by the country of remaining trapped in a middle-income group instead of advancing to a high-income economy, he is not prepared to take the next crucial step to admit that it was the NEP which had placed Malaysia in such a trap, with the country unable to harness her wealthy human and natural resources because of a divisive and discriminatory NEP.
When we achieved independent nationhood in 1957, Malaya was No. 2 in Asia after Japan in terms of prosperity and income, despite having a per capita income of only US$200.
In the first decade after Independence, Malaysia’s per capita GNP was still ahead of South Korea and Taiwan although behind Hong Kong and Singapore.
Malaysia’s per capita GNP in 1967 stood at US$290 as compared to Taiwan’s US$250 and South Korea’s US$160 with Singapore at US$600.
Singapore, South Korea and Taiwan have long joined the ranks of high-income nations while Malaysia got stuck in the middle-income trap for the past four decades.
The government should commission a study as to how Malaysia was trapped in the middle-income trap for four decades because of NEP if we are really serious in wanting to join the ranks of high-income countries?
In his speech, Najib said the government is committed and serious in undertaking a total innovation to a more advanced economy – with the slogan “Innovative Leadership for 1United, Innovative Malaysia”.
Slogans and sloganeering however will not transform Malaysia into an innovative economy.
Is Najib prepared to pass the first test of an Innovative Economy by bringing to a close the NEP policy, which both stunted Malaysia’s economic growth as well as Malaysia’s nation-building process?
[Speech in Parliament on 2010 Budget on 29.10.2009]
#1 by OrangRojak on Friday, 30 October 2009 - 11:25 am
The NEP is clearly a bad policy. Having said that, your detractors accuse you of wanting to enrich your city-dwelling fellows at the expense of the suburban and rural not-your-fellows. Never mind the racism inherent in raising the spectre at all – I suspect this is what persuades many voters to withhold their support from your party and coalition.
In your recent ‘alternative budget’ you announced a figure of around 700 megaringgits for poverty over 5 years. I suspect very few Malaysians identify with “so well off I don’t need any more money”, so this appears to be somewhere around RM10 per head per year for poor people. In the same budget you alluded to (at least, can’t remember the detail) tax breaks for urban Malaysians. If the tax break amounts to one whole percent, it is likely that this benefit will be far larger than the one you allocate for poverty. It appears from your budget that you intend to do exactly what your detractors warn.
The NEP was a bad solution to an appalling problem: an unmistakeably enormous economic inequality between Malaysians correlated with ancestry. What mechanism are you going to replace NEP with that will guarantee the pre-NEP problem will not recur? It appears to me that if you abolish NEP (as any right-thinking person should) and deliver the promises in your alternative budget, the pre-NEP situation will very quickly return. And nobody in their right mind would want that.
#2 by k1980 on Friday, 30 October 2009 - 1:16 pm
//Slogans and sloganeering however will not transform Malaysia into an innovative economy.//
Caramba, we have an “astronaut/angkasawan” who can’t even spacewalk outside the spacecraft nor pilot the return capsule to earth. It would have been far cheaper to send a chimpanzee in his place. (Weigh less, occupy less space and is even more intelligent than him)
#3 by Loh on Friday, 30 October 2009 - 1:28 pm
///What mechanism are you going to replace NEP with that will guarantee the pre-NEP problem will not recur? It appears to me that if you abolish NEP (as any right-thinking person should) and deliver the promises in your alternative budget, the pre-NEP situation will very quickly return. And nobody in their right mind would want that.///– OrangRojak
NEP founders knew that the policy was bad and they promised that it will last only for 20 years.
The pre NEP situation was the way a united multiracial country would move in a peaceful manner, if Article 153 had been removed after 15 years. The riots resulted because the powerful MB of Selangor wanted to remain in power. Tan Sri Abdullah Ahmad gave the full details in this site sometime ago.
NEP is a bad policy created by UMNO. Other government is not obliged to follow. The twin objectives of NEP, poverty eradication can be done in many ways different from what UMNO practised, and it cared only for Malays. As for identification of economic activities with race, the ‘correction’ undertaken by UMNO in the name of NEP has made it worse. The country should just forget about what race excel in what economic field. Practise equality, and let the persons achieve their full potential. There need to be no follow-up to a bad policy.
Racial polarisation is created by politicians to retain power. When race does not feature in government policy, institutionalised segregation will not take place, and the people will be at peace with one another as fellow human beings. The sense of jealousy when encouraged by the authority does more harm than motivating them to progress. But UMNO leaders use it as a device to gather votes, and to bully.
NEP said to be removing link to race, but using race in the process, and race get highlighted all the time. NEP should just die.
#4 by OrangRojak on Friday, 30 October 2009 - 1:49 pm
k1980, we need a ‘Malaysian Dream’ don’t we? I personally think it’s time to put young people in charge. Malaysia appears to me to be devoid of hope, devoid of aspiration – unless it’s to a really lucrative spot in the patronage pyramid.
Jo Kittinger is regarded by many as the first man in Space. Watch the video and tell me that if the Malaysian Air Force, in partnership with a local science faculty had merely repeated the same experiment, perhaps with a few contemporary novelties like live streaming (screaming!) on the web (and maybe a giant ‘1’ on the side of the gondola), that Malaysians wouldn’t have been shouting “F*** yeah!” – or whatever the local equivalent is, and admiring the size of the astronaut’s gonads, rather then wondering whose she had to polish.
http://www.youtube.com/watch?v=MQ7N6V-YKJ8
I think it would be an immediate improvement if Malaysia would just stop pretending to be a developed country. If Mustapha whatsisname wants to try to be a proper Malaysian astronaut, and someone can find a balloon from somewhere, I’ll sponsor his underpants, or something. I wouldn’t want them back afterwards. If he did that, I might even be able to remember his name.
#5 by Bigjoe on Friday, 30 October 2009 - 2:06 pm
What I can’t stand about so called ‘high income economy’ and ‘innovation’ talk is that the obvious reply is ‘not so easy’ is not immediately shot back. Where is it that says that the PM of Malaysia can open his mouth with a mediocre idea in challenging times and he does not get ask to defend it in detail? In the US, if Obama mouth off even just a word, the reporters would demand more precise details almost immediately.
When LKY decided back in the 1980s to move Singapore away from low-cost economic model – he spelled it out clearly – labour productivity and investment in human capital BUT continue to keep cost down. He made no bones about it that there will be huge cost to it. Even his son spelled it out even more clearer when he said that if he can’t find a job for an older worker, he makes sure that his children will find jobs. It was brutal economics at its best.
What Najib is doing is making promises without spelling it out how. He says he want to attract high paying investments which are not many and he has no answer to a labour force that is miseducated and mistrained for decades and education system that is still behind and NOT catching up? He think he can do it by sending people overseas who are good at making presentations? What do you investors are? Fools for cheap car salesmen/women? Even if there is a few, how many is he going to find to deliver the promise to how many?
Najib is not doing anything. All it is sloganning and massaging so that someday he can say either ‘I told you all so/I did it first even if the opposition is the one doing it’. Can’t do it, just claim credit for someone elses work and avoid responsibilities. THAT is Najib 1Malaysia which is why its F*** you Malaysia…
#6 by Godfather on Friday, 30 October 2009 - 2:27 pm
Rojakman:
Since when has Malaysia become a developed country ? Who’s been going around touting that this is a developed country ?
We cannot become a developed country just because the government stops its subsidies and raises the prices of goods to market pricing, and at the same time increases salaries to offset such price increases. It’s the mindset of the people that needs to change – the willingness to work hard in a meritocratic environment, the willingness to discard crutches, and the ability to innovate. You throw out the NEP tomorrow, and I guarantee you there will be a riot. You stop the APs tomorrow, and the recipients of the APs will turn the streets into their parking lots.
The chances of Malaysia stagnating in the twilight zone is in fact much higher than it making the leap into developed status.
#7 by OrangRojak on Friday, 30 October 2009 - 2:37 pm
“poverty eradication can be done in many ways”
Absolutely right Loh, but it seems to me that the DAP alternative budget (DAB) is not a way to eradicate poverty, but to exacerbate the problem. I’m not an economist, but I consider myself numerate.
Aside from the urban / other difference, the benefits offered in the DAB were fixed for the poor, and proportional to income for the urban better off. I absolutely loathe talking about these things in terms of race, but it strikes me as self-evident that comparatively recent arrivals to a land are likely to be concentrated in urban areas (all lands and all values of ‘recent’ since our very much darker mothers left Ethiopia). Any policy that benefits the urban dweller (who almost by definition is less in need of benefit) more than those in rural areas will be instantly confused with racist intentions.
I expect DAP is not suggesting that the DAB will make Malaysians worse off. Let’s say, for the sake of my argument, that DAP promote their economic ideas by saying that people will be better off with the DAB. If they are not, why bother, right? A fixed benefit for the poor and a proportional benefit for the wealthy will only mean that the benefit for the wealthy will grow while that for the poor does not – hence widening the gap between rich and poor.
I’d like to see Pakatan Rakyat commit to making a huge change to the distribution of wealth in Malaysia. Not only because it’s an apparent problem as soon as we open our front doors, and not only because it’s what a responsible member of a single community (Malaysians) would do, but also because ‘we will give you much more money than BN ever did, forever, if you vote us into power’ is probably the single most likely viral marketing scheme that would reach the ears of those who are currently protected by BN media suppression.
And it would do what the NEP was alleged to do, but manifestly failed: it would make poor people – regardless of who they’re related to – less poor.
#8 by trublumsian on Friday, 30 October 2009 - 2:48 pm
any right thinking person COULD abolish the nep, but any right thinking person SHOULD NOT abolish it, not at the drop of a dime. imagine a zombie movie, some idiot decides to liberate them by breaking the locks that keep them in. now, you have a population of headless torsos roaming around, arrggghhh!
#9 by OrangRojak on Friday, 30 October 2009 - 2:52 pm
Godfather, while I’m in reluctant agreement with you on the likely response to ending the NEP, I don’t agree that “It’s the mindset of the people that needs to change” for the same reason that I think it’s unfair to blame the voters of Bagan Pinang for their choice. Malaysian people live in a society that’s bogged down by patronage, cronyism, corruption and incompetent authoritarianism. I think their mindset is probably highly as highly adapted to the local environment as any finch’s beak ever was to an island diet.
There is no promise of reward for hard work. No mechanism by which a dedicated and resourceful individual can guarantee their success if they only try. There is only selection by an unreliable critic. If you are selected, you are fortunate. When a person makes it to the top in Malaysia, it is often not apparent why. In such an environment, I would expect metaphysical beliefs to really flourish! Malaysians can see Maradonna’s ‘Hand Of God’ everywhere!
#10 by Godfather on Friday, 30 October 2009 - 2:57 pm
“Malaysian people live in a society that’s bogged down by patronage, cronyism, corruption and incompetent authoritarianism. I think their mindset is probably highly as highly adapted to the local environment as any finch’s beak ever was to an island diet.”
Absolutely correct. Darwin’s Origin of Species tells us that this is where the country is headed – and that’s why they can never be a change in the NEP without an overthrow of this government.
#11 by undertaker888 on Friday, 30 October 2009 - 3:20 pm
rojak,
How do you get rid of
“patronage, cronyism, corruption and incompetent authoritarianism. I think their mindset is probably highly as highly adapted to the local environment as any finch’s beak ever was to an island diet.”
if you keep on thinking of
“I don’t agree that “It’s the mindset of the people that needs to change” for the same reason that I think it’s unfair to blame the voters of Bagan Pinang for their choice. ”
It is contradicting and confusing.
#12 by OrangRojak on Friday, 30 October 2009 - 4:49 pm
“contradicting”
Oh. Is it?
Most people act for their immediate or short term benefit. If the environment rewards a certain type of behaviour, they would be maladjusted not to produce the behaviour. Democracy in Malaysia only really offers an opportunity to display the behaviour you want from the Bagan Pinang voters once every 5 years. If they vote BN now and PR at the next GE, they get the benefits they expect from Isa and (if you see it that way) the benefits of a PR government later. If they had voted PAS, they would have lost the Isa benefit, and would still have to wait to feel the alleged benefit of a PR government. Their mindset appears to be very well adapted, strategically speaking.
You have to bear in mind that a by-election is a special case. The only ‘principle’ they could have demonstrated in Bagan Pinang is how to make themselves worse off. It’s not a problem with their mindset, but the choices they’re presented with.
#13 by undertaker888 on Friday, 30 October 2009 - 5:26 pm
//Most people act for their immediate or short term benefit…“patronage, cronyism, corruption and incompetent authoritarianism…..rojak
The “get-rich-quick-scheme”. Agree?
///I don’t agree that “It’s the mindset of the people that needs to change” for the same reason that I think it’s unfair to blame the voters of Bagan Pinang for their choice. …rojak
Unfair to blame them? Come on. Here’s the blue and red pill. Take your pick.
#14 by OrangRojak on Friday, 30 October 2009 - 6:37 pm
“get-rich-quick-scheme” Agree?
No, not at all. When I say “short-term’, I mean raising money for household bills. And being able to afford, not getting rich. Things like school fees, food, maintenance on your house and car. Up to this year and maybe next. Long term to me would mean 5-20 years. For benefit from vote choice, it means being able to feel the benefits soon (year or so) after voting. This is a major problem for PR, particularly in by-elections, but also possibly after a GE win.
What does the PR voter get at the moment? Perhaps up to a year (if we’re being generous) of feel-good factor, followed by a few years of strangulation by federal government.
It’s probably as obvious to most Malaysians (if we can interpret the last GE results that way) as it is to us that short-term gain comes at the cost of long term failure, but that and the strangulation thing are the reasons why I would expect PR to struggle in by-elections. Have they improved on a previous win in any by-elections? Was it in a PR-state or a BN-state?
I think there are places in Malaysia that can afford a ‘civil society’ that is outspoken in their condemnation of the current government. I don’t think Malaysians for the most part can afford to bite the hand that feeds them until there’s a realistic offer from someone else. There’s nothing on offer in Malaysia except at General Election time.
the blue and red pill.
What is it you want? Malaysians to rise up as one and decry the shoddy state of their country, thanks to decades of incompetent and self-enriching government? Haven’t you ever wondered why the Burmese scolded the funny old American guy for swimming in the lake, instead of the Generals for detaining her? Or the Indians protested against the British in KL because they’ve got crap lives? There isn’t really a choice for most Malaysians, except once every 5 years. If you take your pill too early, you’ll just make yourself sick.
#15 by cheng on on Friday, 30 October 2009 - 7:46 pm
Soon Msia GNP/capita will be behind Thailand, Turkey n China
#16 by undertaker888 on Friday, 30 October 2009 - 10:59 pm
//the blue and red pill. What it is you want?//
I am not talking about revolution. I am talking about having the choice of choosing..this (blue pill)
“patronage, cronyism, corruption and incompetent authoritarianism. I think their mindset is probably highly as highly adapted to the local environment as any finch’s beak ever was to an island diet.” and maybe a trajedy like Kampar later,
or the red pill
“What does the PR voter get at the moment? Perhaps up to a year (if we’re being generous) of feel-good factor, followed by a few years of strangulation by federal government.”
a little discomfort short term wise, but a lot more benefits than what BN can offer in the long run.
#17 by Onlooker Politics on Saturday, 31 October 2009 - 1:29 am
“A fixed benefit for the poor and a proportional benefit for the wealthy will only mean that the benefit for the wealthy will grow while that for the poor does not – hence widening the gap between rich and poor.” (OrangRojak)
OrangRojak,
In Economics, there are words like “relative poverty” and “absolute poverty” which are commonly used terminology in order to explain which group of the so-called poor people has to be given special attention in order to achieve the objective of social justice. When the NEP set the objective to eradicate poverty regardless of race, it actually meant to eradicate the absolute poverty which could be measured by the yardstick of a poverty line.
A fixed benefit for the poor is a good measure to eradicate the absolute poverty. For instance, those poor and unemployed people in the United States can apply for food stamps from the Social Security Offices operated by the U.S. Federal Government. With the offering of fixed benefit, the Government can make sure that no one citizen, whether young or old, shall die in starvation due to absolute poverty.
A proportional benefit given to the wealthy can make the wealthy much richer only when the wealthy is successful in making profit in his/her investment. However, it is not neccesary that the wealthy will always make profit in his/her business investment. Sometimes he/she may make loss too. If the benefit which is to be obtained by the wealthy in a successful investment is not made proportional to the profit so made, that will mean that the wealthy will have to get a diminishing return when he/she makes profit in his/her business investment. Who then will have the desire or intent to invest further in Malaysia if he/she expects a much lower return from the additional investment when the investment starts to report earnings in the profit/loss statement? Since the corporate tax rate in Malaysia is a fixed rate, that is 26% in Najib’s 2010 Fiscal budget, the wealthy will surely get a proportional benefit even after paying the corporate income tax.
What your main concern here is that the proportional benefit to the wealthy will tend to widen the gap between the rich and the poor. We must understand that it does not make sense to want to totally eliminate the income gap between the rich and the poor because this over-enthusiasm in seeking economic equality will only kill the desire for the individual to work hard and will also kill the desire for the individual to take risk in entrepreneur endeavour. As a graduate from a European university during his young age, the late Vice Premier of mainland China, Deng Xiao Peng, understood that absolute economic equality was no good to the national economic development. Therefore during the second half of 1970s and early 1980s, he bravely went against the will of the leftists who insisted on communist fundamentalism and engineered to make China switch to an individual entrepreneur system with incentive of allowing the private entrepreneur to retain business profit for himself/herself. Mainland China’s economic model experiments have provided a good evidence that a mixed economic system which involves with regulated free enterprise system coupled with minimum welfare system is the best economic model for an underdeveloped nation or a developing nation.
While the government should seek to narrow the individual income gap through a system of highly progressive multiple brackets personal income tax rates, it should not attempt to kill the investment desire or intent by purportedly seeking to restrict the profit growth potential of a corporate organisation. A corporate organisation should not only be allowed the chance but should also be given the incentive of potential proportional benefit from the risk-taking effort so that it will be encouraged by the profit motivation to plow back its retained profit into further investment in order to create much more economic activities and hence create much more job opportunities. It is only when a corporate organisation has decided to siphon out the corporate cash into the hands of individual investors through declaring and distributing company dividends then the private individual shall then be taxed in accordance with a progressive personal income tax rate. Therefore the corporate tax rate shall always be a fixed rate which will give proportional benefit in order to provide incentive for the investors to invest in a free enterprise system.
#18 by OrangRojak on Saturday, 31 October 2009 - 2:38 pm
Onlooker Politics, I didn’t mention eliminating any income gap! I was merely pointing out that the juxtaposition of fixed-poor, proportional-wealthy in the DAB is exactly what DAP’s tormentors accuse it of.
You have to remember that Malaysia is not a city state. ‘Pressure cooker’ economics in those places does not risk rural deprivation and an underclass revolt! There is zero possibility of (and possibly little value in) ‘educating’ rural Malaysians in the glories of getting rich. To them, it’s just going to look like pie in the sky, compared to the (often literally) concrete offerings of your competitors.
Malaysia had the most unequal distribution of wealth in South East Asia, the last time I looked at the indices. As long as that persists, the poor of Malaysia will be susceptible to patronage politics. My suggestion is merely to make the ultimate gesture in patronage politics, by guaranteeing them a reliable basic allowance, independent of assessment, so that there’s no criterion subject to political manipulation which can be used to influence their votes in future. I think that alone might be worth two terms in power!
Malaysia’s poor won’t really be ‘freed’ in any great sense, by RM500 (for example) per year, but it will inoculate them against vote-buying, which is the basis on which Pakatan Rakyat can never openly compete with BN.
Pakatan’s one huge problem is its inability to convert the rural voter to its cause. There is no ‘education’ possible for these voters: they believe what UMNO tells them – and the DAB reinforces it! For me to dare to ‘hope’ for a different Malaysia, I’d like to see this one issue tackled head on with the only tool that is proven to work in Malaysia.