by Dr Chen Man Hin, DAP life adviser
The ETP (Economic Transformation Programme) without the New Economic Model (NEM) cannot achieve a high income economy for the people of Malaysia
Immediately after the UMNO assembly where the delegates unanimously rejected the NEM proposal to liberalise the economy beginning with the removal of the 30% bumiputra equity. There was alarm that this would mean the end of the NEM which was promoted Najib since he became Prime Minister.
To assuage the fears of investors and the economic and business world, PM Najib quickly assembled a coterie of 10 foreign investors before a gathering of a few thousand people, PM Najib presented them as multi-billion investors who are investing in the country. They were the pioneers of the ETP which is expected to harvest some US$444 billion of projects to propel the economy from a middle income to a high economy status by the year 2020.
This translates to bringing in investments averaging 1,300 billion ringgits a year. The government expects 99% of the money to come from the private sector.
The big show on ETP presenting ten tycoons, could only collect US$5 billion. This is a pittance compared to the 1300 billion ringgits per year needed to reach a high economy status. There is a very long long way ahead for the Prime minister.
These days investments are hard to come by. The investment confidence is low. It is well known that FDIs into Malaysia fell 81% to US$1.36 billion for 2009 compared to 2008. Malaysia FDI was lower than the FDIs to Thailand and Indonesia. For the first time FDI to Malaysia was lower than the US$1.95 billion FDI into Philippines.
To reach the targeted figure of US$444 billion by year 2020, which amounts to 1,300 billion ringgits a year is a tremendous task. The RM5 billion promised at the big ETP presentation is a pittance. It will be harder to attract investments with the 30% bumi quota levy on investors both local and foreign.
There are many factors causing Malaysia to be unattractive, some of which are corruption, lack of skilled workers because of migration, crooked judiciary, no rule of law but most all the NEP. The NEP insists that investors, both local and foreign, must surrender 30% of their equity to bumiputras. Investors prefer to invest in a country that has a liberal free market.
The insistence at the UMNO Assembly that the 30% bumiputra equity be retained. They prefer to have the NEP rather than the NEM. This will cause foreign investors to stay away.
LEARN THE LESSON OF THE MAHATHIR ERA
PM Najib has embarked on a policy of huge spending on projects and building monstrous structures to uplift the economy. Mahathir built the twin towers. Now Najib wants to build a 100 storey Merdeka Tower. The economy under Tun Mahathir progressed but at a much slower rate than the four Asian Tigers of Singapore, Hong Kong, Taiwan and S Korea. The Tun could not accelerate the economy because the economy was dragged down by the NEP, which drove investors away.
Now PM Najib is following the way of Mahathir. Under Tun Mahathir and later Abdullah, the per capita income in 2009 was only about US$8,000, compared with the US$34,000 for a Singaporean, US$32,000 in Hong Kong, US$19,000 in S Korea and US$17,000 in Taiwan, why is Malaysia left so far behind. The reason is a liberal free market economic system in the four tiger economies. Malaysia spent profusely, but it has no free market because of the NEP which caused investors both local and foreign to stay away. Malaysia is not on the radar of investors any more.
The UMNO Assembly has stressed that it wants to keep the 30% bumi equity of the old NEP. They do not want the economic structuring or liberalisation as practised by the Tiger economies. As PM Najib cannot have the NEM but must follow the old NEP, the prospects of transforming a middle income economy to a high income economy are extremely dim.
Should we standby and let the rot continue?
#1 by yhsiew on Saturday, 30 October 2010 - 6:46 am
///The UMNO Assembly has stressed that it wants to keep the 30% bumi equity of the old NEP. ///
Don’t be self-deceived. Given choice, no investor would give top priority to invest in a race-based economy.
#2 by Loh on Monday, 1 November 2010 - 3:55 pm
///There are many factors causing Malaysia to be unattractive, some of which are corruption, lack of skilled workers because of migration, crooked judiciary, no rule of law but most all the NEP. The NEP insists that investors, both local and foreign, must surrender 30% of their equity to bumiputras. Investors prefer to invest in a country that has a liberal free market.///– Dr Chen
Corruption has become rampant because of NEP. First of all, the so-called negotiated contracts of government projects are legalized corruption. That is at the politician’s level. The almost one-race government services allow the ‘you scratch my back and I scratch yours” culture to prosper. Thus rules are not followed, and rules are meant to persecute.
It is NEP which discriminates against those born the wrong race, and they have been waiting to emigrate. The crooked judiciary is the work of Mamakthir, and that facilitates rule by law to weed out anybody who could pose a challenge to power. The crooked judiciary is even utilized to topple a state government. It is NEP that gives the powers-that-be undisputed hold on party subordinates. And worse he had no love for the country knowing that his hold to power is not mandated by heaven. That is why NEP serves primarily his interest, including purifying the blood in the bloody; he could decree that his blood is pure Malay blood. But Malay is a term which has no definition besides what has been stated tautologically in Article 160 of the constitution. How then can Mamakthir claim that he had 100% Malay blood when pure Malay blood is an unknown item?
Najib declared that the UMNO Putera Chief was Malay though his racial origin is unknown as Kerismuddin confirmed it with official authority. If persons of unknown racial origin could be Malays, then everybody could be treated as Malay when confirmation is not needed. Why then did Najib threaten bloodshed when he could pretend that all Malaysians are Malays, and treat every Malaysian equal?
NEP insists that all new investors since the advent of NEP surrender 30% of their equity to Malays. Corporate sector capitalization has increased more than 10 folds since 1970. Thus the 30% extracted from investors since 1970 would have 27% of market capitalization in the hands of Malays. PNB and other government resources have obtained at least 10% of the equity capital which are said to be held in trust for Malays. Thus, Malays and Malay-interests Corporations would have obtained 37% of the corporate share capital by now. Non-Malays have no say as to how Malays convert their equity share capital to other instruments of wealth. As nobody can see the cake he has eaten, it would be unfair of the government to ignore, while computing the net worth of Malays ownership of equity capital in the country, other forms of wealth owned by Malays which originated from the equity capital through the 30% policy, including financial investments overseas. To suggest that the 30% target has not been fulfilled when the government has insisted on meeting its target on an ongoing basis is arrogant. It is a bully. When that is accompanied by threat of riots which the government hints that it is at will to make it happen, the country is worse than Zimbabwee.
The government declares that the 30% is an important target but it has not justified why it is so, other than quoting that as a wish of Tun Razak. It is a fact that not every single person classified as Malay will benefit from the 30% target. Some obviously will not. The 30% target should have been achieved in 1990, had a correct accounting be made. Unfortunately UMNO chooses to pretend that the 30% target had not been achieved, even to this day. Clearly those who benefited from the infamous 30% policy will return for more, and those who have not benefited over the past 40 years will continue to be left out. Are we to believe that those Malays who have no chance to the 30% policy will instigate and cause riots? If that is so, then they should have done it anytime during the past 40 years and more so after realising Mamakthir sons are billionaires. Thus riots can only be initiated by those who had benefited from the 30% policy, and are insatiable, if Najib’s threat is plausible. Clearly those who benefited form the 30% are the UMNOputras who number less than 10,000. They are asking for more. It is a blackmail; but who is to know that the show is not choreographed by UMNO.
///The insistence at the UMNO Assembly that the 30% bumiputra equity be retained. They prefer to have the NEP rather than the NEM. This will cause foreign investors to stay away.///– Dr Chen
UMNO can have any target, so long as they work for it. It is thuggery to use government policies to take advantage of a sector of the population, based on race. The two thousands UMNO delegates have as much democratic rights as every other Malaysians. It is because the government chooses to create racial polarization to retain power by coercing Malays to vote for UMNO through threat and pandering that uncivilized demands are the norm.
Gerrymandering by the government where people in towns and cities have relatively less voting weights has now backfired when Malays migrate from the rural areas. Urban Malays see how UMNOputras made politics the most rewarding business. That is why Malays are split, and those who want the 30% rules to remain are in the urban areas. They have the audacity to claim that because of poor rural Malays NEP and particularly the 30% rule should remain. How people know no shame!
#3 by Loh on Monday, 1 November 2010 - 7:36 pm
///Now PM Najib is following the way of Mahathir. Under Tun Mahathir and later Abdullah, the per capita income in 2009 was only about US$8,000, compared with the US$34,000 for a Singaporean, US$32,000 in Hong Kong, US$19,000 in S Korea and US$17,000 in Taiwan, why is Malaysia left so far behind. The reason is a liberal free market economic system in the four tiger economies. Malaysia spent profusely, but it has no free market because of the NEP which caused investors both local and foreign to stay away. Malaysia is not on the radar of investors any more.///– Dr. Chen
Windfall gain from oil sends this country a low income trap. The easy money from oil allows the government to implement policies geared for its re-election. That is perfected by the way NEP has been implemented since Mamakthir ascended the pinnacle of power.
Through NEP Malays formed over 90 % of civil servants bloated at 1.3 million. That makes it the highest proportion of civil servants in the labour force anywhere in the world. Government becomes the largest employer so that unemployment among the favoured race could be reduced. It satisfies the ego of government employees as workers of the formal sector. For those who do not have official position with power to supplement their income, the job offers them a place for pastime. It is leisure with pay and perks. For those who are able to create their importance where there are, they were able to trade money for not initiating obstacles. Eventually, government services in Malaysia are the choice of Malays. To meet with popular demand government positions are created. They are created also to satisfy the ever productive education institutions which produced otherwise unemployable graduates. Thus, jobs outside the government sector are not attractive to Malays, and foreigners are needed to keep the economy going. Instead of working on the production of goods and services in the private sector and contribute to government revenue in taxes, one-third of government servants are factually on welfare. That would not be viable if not for the oil windfall. As government services are a lifetime career, the government through its political exigency has created lifetime welfare for 400,000 able body persons. They form more than 5% of the workforce. More unfortunately there is no way that they would be retrained for other productive services.
Some three million foreign workers are in the country and half illegally. They are here because their countries are at the earlier stage of economic and social development. They satisfy the need of labour intensive industries, plantation, construction sector, restaurants, trading and domestic services. Other than those from Myanmar workers from other countries demand for higher salary as their home country catches up with economic development. Pretty soon the foreigners would be demanding higher pay than for the local, and yet there would not be local substitutes for their jobs. Najib should ask whether the current low income status is indeed sustainable without aiming for the sky.
The government announced its intention to encourage overseas Malaysians to return. The results indicate that the exercise was not successful. There were complaints from non-Malays who applied that they were not the targeted invitees. Judging from the statement made by Najib, it can be surmised that the government only wants overseas Malay Malaysians to return. Strangely when Najib was warm in welcoming somebody whose racial status was unclear as Malay, he has problem welcoming Malaysians who are known to be potential tax paying citizens. Is Najib still being reminded by his father’s saying that it was good riddance for non-Malays to leave Malaysia? He may be right. Why take the trouble to compete with Chinese when their absence from Malaysia make life that much more comfortable.
Malaysia is in this mess because of racial politics, and because UMNO leaders were lazy to work out government policies which would ensure its re-election without having to pander to racial issues. The windfall from oil makes it possible for the government to waste its resources. But the end results of Malaysia’s economic and demographic structure make it unsustainable without continued windfall from oil. How would the government raise its revenue to keep the country going when oil revenue stops? The government could sell its submarines for a start, the jet fighters next and sand or land that follows.