Lim Kit Siang

20-Day Countdown to 13GE – Lies, Damn Lies and PEMANDU Statistics

Oh! What a tangled web we weave,
When first we practise to deceive!

Sir Walter Scott, Marmion, Canto vi. Stanza 17.
Scottish author & novelist (1771 – 1832)

Datuk Seri Idris Jala, CEO of PEMANDU has issued a statement stating that growth of Gross National Income (GNI) per capita in US dollars from 2009 to 2012 has been revised down to 41 percent from 49 percent.

He is reported to have said that the revision arose following the adoption of a new accounting method, rather than a deliberate attempt to fudge numbers.

He pointed out that the change in figures was due to the adoption of the latest version of the United Nations System of National Accounting (SNA 2008) in 2012 which had pushed the GNI per capita up for 2009 from US$6700 to US$7059.

He offered other weak and lame reasons defending the method and the numbers put out by PEMANDU.

Little of what he said cuts much ice. The change in numbers makes little difference. The attribution to an adoption of a new method or international standard has little to do with the nature of the numbers.

He has been caught in a gross deception by applying the concept of GNI to project growth in per capita incomes of individuals. GNI is defined by the UN Statistical Division as:

Gross national income (GNI) is GDP less net taxes on production and imports, less compensation of employees and property income payable to the rest of the world plus the corresponding items receivable from the rest of the world (in other words, GDP less primary incomes payable to non-resident units plus primary incomes receivable from non-resident units). An alternative approach to measuring GNI at market prices is as the aggregate value of the balances of gross primary incomes for all sectors; (note that gross national income is identical to gross national product (GNP) as previously used in national accounts)

The Department of Statistics, Malaysia, in its Annual National Accounts: Gross Domestic Product (GDP) 2005 – 2011, indicates that it defines GNI as:

Gross national income (GNI) is the aggregate value of the balances of gross primary incomes for all sectors; (gross national income is identical to gross national product (GNP) as hitherto understood in national accounts generally)

These definitions make it patently clear that GNI is an aggregate value and covers more than what households receive. Thus, GNI per Capita is not a measure of what can be attributed as a receipt by households. This is best illustrated by the following Table. PEMANDU has used the wrong tool.

GDP AND GNI ESTIMATES (In Current Prices)

Period Gross Domestic Product (GDP) Net factor income payments from abroad Gross National Income (GNI) Mid-year population (‘000) Per capita GNI (RM) Gross national savings
2005 543578 -23942 519635 26046 19951 200109
2006 596784 -17294 579490 26550 21826 231519
2007 665340 -13984 651355 27058 24073 257943
2008 769949 -23034 746915 27538 27094 296630
2009 712857 -14215 698642 28082 24879 237869
2010 795037 -26514 768523 28589 26882 272114
2011 881080 -21971 859108 28964 29661 304907
2012 937532 -33683 903850 29337 30809 298704

It is clear from this table that GNI is a derivative of GDP with an adjustment for certain external payments. GNI is not what accrues to households.

The conventional measure for assessing what accrues to individuals is represented by Private Final Consumption (PFC). It is this what individuals have and therefore it is this that is the appropriate yard stick. The estimates of PFC per Capita tell a very different tale from the one being spun by PEMANDU and by the Prime Minister.

Private Final Consumption Per Capita (in Current Prices)

Year Private Final Consumption RM Million As percentage Share of GDP Percent Mid – Year Population (‘000) Per Capita Private Final Consumption RM Exchange Rate Per Capita Private Final Consumption US $
2005 240,188 44.2 26046 9222 3.6682 2514
2006 264,584 44.3 26550 9965 3.4375 2899
2007 300,418 45.2 27058 11103 3.3333 3331
2008 344,215 44.7 27568 12486 3.5246 3543
2009 348,168 48.8 28082 12398 3.2211 3849
2010 377,631 47.5 28589 13209 3.0600 4317
2011 418,473 47.5 28964 14448 3.0888 4678


Source: Department of Statistics, Malaysia. ANNUAL NATIONAL ACCOUNTS, GROSS DOMESTIC PRODUCT (GDP) 2005 – 2011

What is significant is that the percentage share of GDP accruing to households between 2005 and 2011 in current price terms was virtually unchanged. Thus, factoring in inflation, households have hardly benefitted from overall GDP growth. This substantiates the point made by many analysts that earnings and incomes have stagnated, that growth has not benefitted nor contributed to a rise in living standards.

The PEMANDU report and the Prime Minister have shamelessly indulged in claiming an increase of 49 percent (now scaled back to 41 percent) in per capita incomes.

The truth of the matter is there has been no such implied improvement in the livelihoods of individuals.

These numbers reflect a failure of policies but sadly, a desperate Prime Minister has failed to acknowledge the failure.

Even more telling is the fact that he has crowed about continuing on this path and promised the nirvana of reaching by 2020 a high income status with a level of US$15,000 GNI per capita, a measure with little meaning as far as the man in the street is concerned.

The magic figure of US$ 15,000 with which the powers-that-be are obsessed requires some clarification.

What PEMANDU has done is a two stage juggle. It has first converted the GNI per Capita series in Ringgit terms into US Dollars. The resulting converted numbers in US Dollars differ grossly from the World Bank’s US $ GNI per Capita figures for Malaysia as can be observed from the Table below.

ALTERNATE ESTIMATES OF GNI

Year RM GNI per capita Exchange Rate to US $ GNI Per Capita in US$ (BANK NEGARA) GNI Per Capita US$ (PEMANDU) GNI Per Capita US $(WORLD BANK ATLAS METHOD))
2009 24879 3.5246 7059 6700 7550
2010 26886 3.2211 8346 8100 8090
2011 29661 3.0600 9693 9700 8770
2012 30809 30888 9.974 9970 NA

The second juggle that PEMANDU has done concerns the determination of the projected “High Income” level.

The PEMANDU Report states:

“The World Bank’s current GNI per capita threshold for a high income economy is US$12,476. We factored in the World Bank’s published historical global inflation figure of two per cent until 2020 to arrive at a high-income threshold of US$15,000.”

This is totally flawed for several reasons. First and foremost the threshold figure of US$12,476 for High Income level is based on a unique method called the World Bank Atlas method and is in current dollar terms. It must be stressed that this figure is never projected by the World Bank. Indeed, it cannot be projected and certainly not in the manner done by PEMANDU.

When the Prime Minister introduced the PEMANDU Report, he added insult to injury. He prevaricated by not acknowledging that the nation’s long suffering taxpayers will be further burdened by the imposition of the GST, the withdrawal of consumer subsidies, and the reduction of vital services in the field of health with the privatization that is planned.

The Prime Minister cannot deny that these steps are in the works should he be re-elected. Indeed, these measures have been discussed with the IMF which warned the Government about the exploding debt.

PEMANDU has demonstrated via its annual report a level of incompetence beyond belief.

Its CEO must be held accountable; he has sullied his professional reputation by sanctioning the use of fabricated numbers generated by highly paid consultants with little competence or understanding of rudimentary macro-economic analytical tools. He and the Prime Minister owe the public an apology.

It is time for a change of Government.

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