Archive for June 14th, 2010

The 10th Malaysia Five Year Plan : Old Wine in New Bottles – Part 7 (National Agenda for all Malaysians instead of a mutating NEP)

A dispassionate analysis of the forty years of implementation of the NEP-NDP provides many lessons. These include:

  • There is no alternative to pro-growth policies if Malaysia is to attain the original goals of the NEP, namely eradication of poverty irrespective of race and economic restructuring; pro-growth policies are also essential if the Vision 2020 goals are to be achieved.

  • Malaysia has achieved rapid growth and prospered when the policy framework has been pro-market and liberal.

  • On the other hand, pro- distribution policies such as those favored and advocated by Faaland in the early 1970s and again revived now championed by PERKASA, have led to slow overall growth and more specifically low achievement of the restructuring targets.

  • The private sector constitutes the main engine of growth. Over-regulation of the sector under the NEP framework creates impediments to investment, both domestic and foreign, thereby impacting on poverty eradication and opportunities for restructuring.

  • There is a high cost of doing business when there is over-regulation or bureaucratic control. Distortions emerge that create opportunities for rent-seeking and corruption.

  • Read the rest of this entry »


The 10th Malaysia Five Year Plan : Old Wine in New Bottles – Part 6 (Equity Restructuring/Ownership)

Equity Restructuring and Ownership

The Plan restates that the target of attaining at least 30% Bumiputra corporate equity ownership at macro level remains. It goes on to indicate that the focus will be on promoting genuine economic participation, consistent with the objective of sustainable high growth, rather than corporate equity allocation.

The Plan proclaims that this will be achieved through more transparent, market-friendly and merit-based instruments, focused on:

• Strengthening Bumiputra entrepreneurship to help create competitive businesses in high impact sectors;

• Increasing wealth ownership beyond corporate equity to include other properties and business assets such as retail space landed properties,
commercial buildings, intellectual properties and other services through pooling of funds and institutional investment; and

• Promoting Bumiputra representation in high paying jobs through enhanced capability building and demand-side incentives.

These statements can be cautiously welcomed as they represent a nuanced shift. However, if the past is any indicator, this shift may be no more than illusionary and a mutation of the NEP. Read the rest of this entry »


The 10th Malaysia Five Year Plan : Old Wine in New Bottles – Part 5 (Poverty)


Chapter 4 of the Plan document together with several Tables dealing with Thrust 3 in the Appendices present fairly detailed statistics on poverty and income distribution.

In a somewhat self-congratulatory tone, the Plan proclaims that hardcore poverty was reduced from 1.2% in 2004 to 0.7% in 2009 and that the incidence of overall poverty fell from 5.7% in 2004 to 3.8% in 2009. These claims are questionable because of the underlying methodology employed in deriving these estimates.

In the first place there is no indication as to how the Poverty Lines were estimated. Assuming that the methodology used mirrors that used in the 9th Plan, the bar to define poverty is set at far too low a level.

In the second place, the use of “households” rather than “persons” distorts the measurement.

On the flawed basis, 228,400 households were categorized as poor. It is most significant that of these 99,100 were in Sabah with another 27,100 in Sarawak. Thus, there were a disproportionate number of the poor in these two states highlighting gross neglect by the Federal government of Malaysians in these two states. Read the rest of this entry »


The 10th Malaysia Five Year Plan : Old Wine in New Bottles – Part 4 (5 Thrusts of TMP)

The Five Thrusts of the 10th Malaysia Plan

The Prime Minister stressed that the 10th Malaysia Plan is oriented around five key strategic thrusts, namely:

* Stimulating Economic Growth – implementing a policy framework that will galvanize the private sector and promote trade and investment;

* Moving towards Inclusive Socio-Economic Development – focusing government support on those most in need and reforming affirmative action policies;

* Developing and Retaining a First-World Talent Base – improving schools, providing skills training to those in the workforce and implementing important labour market reforms;

* Building an Environment that Enhances Quality of Life – investing in housing, transport, healthcare, utilities, crime prevention and the environment to support economic activity and improved living standards; and

* Transforming Government to Transform Malaysia – building on the success of the Government Transformation Program to continue to improve government performance and transparency to best serve the people

The question that arises is: How different are these in comparison with the corresponding thrusts that were outlined in the 9th Five Year Plan? Read the rest of this entry »


The 10th Malaysia Five Year Plan : Old Wine in New Bottles – Part 3 (Unlearnt lessons from the past)

Unlearnt Lessons from the Past: Where have we come from?

A brief review is in order to understand how the nation got to the precarious point best amplified by a Minister sternly warning that Malaysia is heading towards bankruptcy by the end of the decade.

Malaysia is more integrated into the global economy than many other countries of a similar size and at a comparable stage of development. Globalization is a fact of life. It has contributed both positively and negatively to Malaysian development. On the upside, integration with the global economy permitted the nation to prosper through trade and flows of FDI in the years prior to the East Asian Crisis of 1997. There was rapid economic growth, rising income levels, declining poverty and unemployment and a somewhat more egalitarian distribution of wealth. A contributing factor was the fact that Malaysia was blessed with a rich resource base – its forests and oil and gas. It had reasonably well functioning institutions in the form of an established public service, a modestly independent judiciary and institutions that measured well against those in other developing countries. The nation progressed despite creeping corruption, growing race polarization, authoritarianism and a general deterioration in the delivery of public services. The early 1990s saw a degree of deregulation and the privatization that gave momentum to modest reforms. The economic fundamentals were essentially sound with the budget largely balanced, and low inflation and robust growth. These outcomes occurred despite the constraints and distortions imposed by the NEP.

The 1997 East Asia crisis provided a rude awakening. Absence of accountability, lack of transparency and the growing cronyism, nepotism and the megalomaniac obsession with mega projects Read the rest of this entry »


The 10th Malaysia Five Year Plan : Old Wine in New Bottles – Part 2 (Overview)

An Overview of the Plan

The Plan that has been unveiled, when stripped of the rhetoric and clichés, represents nothing more than a reaffirmation and continuation of past and present policies. To begin with, the Plan is built upon a number of highly questionable assumptions. These include:

  • GDP growth rate of 6 percent as against 4.2 percent between 2006 and 2010

  • Exports are projected to expand by 10.1 percent as against 3.6 percent recorded during the 9th Plan period.

  • Private investment is projected to grow at 16.2 percent during the period of the 10th Plan versus 6.2 percent during the 9th Plan

  • Per capita income in 2015 is estimated at RM 38,845, increasing from RM 23,841 in 2009. This is based on a growth rate of 8.0 percent per annum for the Plan period. No explanation is offered as to why there is a sizable discrepancy between the projected GDP growth rate and the per capita income growth figure. The Plan anticipates that in US dollar terms per capita income will almost double between 2009 level to US$ 12,139.

  • The Plan calls for development expenditure of RM 230 billion. Of this, RM126.5 billion or 55% is allocated for the economic sector,RM69.0 billion or 30% for the social sector,RM23.0 billion or 10% for the security sector and RM11.5 billion or 5% for general administration. This allocation includes a Facilitation Fund of RM20 billion to promote private sector investment in strategic priority areas including infrastructure, education and health.

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The 10th Malaysia Five Year Plan : Old Wine in New Bottles – Part 1


Malaysia faces formidable economic and social challenges. Both domestic and external. These are greater than those faced in the past. These have been acknowledged by Ministers, the World Bank and other analysts. Some of these challenges can be attributed to changing global economic circumstances whilst others are due to policy failures, an approach to governance founded upon rent-seeking, and abuse of power and processes that deny accountability and transparency. Overwhelmingly, implementation of policies associated with the NEP has contributed to the many distortions and a loss of competitiveness, dismal private sector performance, a virtual collapse in the flows of FDI, and sizable capital flight. Overall growth rates are now far below those needed to lift Malaysia out of the middle income trap that it finds itself in. Vision 2020 has become a fast fading dream.

The political Tsunami of March 2008 sent shockwaves across the political landscape. The BN, after an initial state of shock, embraced the rhetoric of change and indulged in notional reforms but the entrenched warlords and power brokers resisted much needed economic reforms as these were seen hurting the self-centered interests of those in power. The timid attempts by the then Prime Minister were resisted and he was chastised and ridiculed and eventually driven from office.
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Old Habits Die Hard With Malaysia’s Five-Year Plans

by M. Bakri Musa

The old Soviet Union may have long ago crumbled, but the underlying mindset – the penchant to control and “plan” everything centrally – still has a tenacious hold, and not just on Russian leaders.

Joseph Stalin initiated the first Five Year Plan, incorporating Lenin’s New Economic Plan (NEP). However, not many would associate Five-Year Plans with Stalin, as he had acquired other notorieties.

It is ironic that 82 years later, an avowedly anti-communist Malaysia would still embrace Five Year Plans and NEP with gusto. The last Soviet Plan was its 12th; the collapse of the Empire took care of the 13th. Even the Communist Chinese have wised up; they now call their “Plan” only a “guideline.”

A century hence Malaysia will still be unveiling its latest Malaysia Plan (MP). In tone and substance, I predict it will be like the present Tenth MP, and all previous ones. It will boast of the wonderful attributes of our blessed country, and how fortunate we are to have such farsighted leaders. Then realizing the incongruity of such lavish praises with the need for yet another plan, the report will lament the squandered opportunities of the past.
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