Race to the finish while still stuck on first lap, say critics on 11MP

Prime Minister Datuk Seri Najib Razak described the 11th Malaysia Plan as the 'final lap' before achieving developed nation status in 2020, but critics say the targets announced should have already been achieved long ago. – The Malaysian Insider pic, May 22, 2015.

Two things have struck observers about Putrajaya’s 11th Malaysia Plan (11MP) presented yesterday – where the money is going to come from, and why policies which should have been achieved are still being worked on so close to the finish line.

Putrajaya yesterday promised that RM260 billion worth of polices in the 11MP will take Malaysia through the last five-year lap of the development race to join the club of advanced economies.

By 2020, Prime Minister Datuk Seri Najib Razak said, Malaysia should have a national income per person (GNI) of US$15,000 per person (about RM55,500), provided the economy grows at 5% to 6% a year in the next five years.

But observers are asking whether Putrajaya can achieve these goals given the uncertain global economy and falling oil prices, two major sources of income for Malaysia’s export-oriented economy.

They also question whether policies in the 11MP will really push Malaysian businesses and industries higher up the value chain, where they should already be if Malaysia wants to become like Germany, South Korea and Japan in five years.

As analyst Yin Shao Loong puts it, the government is implementing policies in the last lap of the development marathon which should already have been in place in the first lap.

'Show me the growth'

Yin of Institute Rakyat, said Putrajaya has failed its own target of achieving 6% growth every year for the past five years in the 10th Malaysia Plan. This growth rate was necessary if the country was to achieve the GNI target by 2020.

“It's optimistic to think that we can maintain these growth rates despite the turbulence in the oil price and the world economy,” Yin told The Malaysian Insider.

Economist Dr Yeah Kim Leng, however, believes that the national income target can still be achieved even if the economy managed a growth rate of 5% per year.

This is since the population is expected to grow 1% per year, yielding a per person income growth rate of about 4%, said Yeah of the Malaysia University of Science and Technology (MUST).

At that rate, Malaysia will cross the high income threshold provided that the ringgit exchange rate and inflation rates relative to the advanced economies do not deteriorate sharply.

“Should we achieve an average of around 4%, the high income target will be delayed by a couple of years only,” said Yeah, who is Dean of MUST’s Business school.

Yeah said 5%-6% economic growth is do-able, given that there are enough domestic savings which are estimated at 32% to 35% of the gross domestic product (GDP).

This is enough to finance the investment rate of about 30% of GDP required to achieve 5% to 6% growth, he said.

“The key challenge therefore is to sustain private sector confidence so that the surplus savings are invested in the domestic economy and not flow out of the country.”

Still on first lap

About a third of the 11MP is focused on sharing the wealth that comes from the growth encapsulated in its first two strategic thrusts: inclusivity and prosperity.

The plan wants to increase the average incomes of the bottom 40% of the populace (now called B40), which makes up 2.7 million households, from RM2,500 a month to RM5,000 a month by 2020 (see graphics below).

Putrajaya also wants to grow the middle class, which now consists of 40% to 45% in five years.

Social scientist Datuk Dr Denison Jayasooria commends this thrust, but questions its approach, such as how poverty is calculated.

The method of calculation is important because Putrajaya tends to harp about successfully bringing down the absolute poverty rate, which is the number of people below the poverty income line of RM800.

Experts argue that developing countries like Malaysia should instead use the relative poverty metric which was also recommended by local economists who authored Malaysia’s Human Development Report 2013.

This measurement of poverty takes into account the rise in living costs and access to social services, relative to how much a household makes a month.

“The PM did not elaborate on refining poverty especially urban poverty and the new indicators needed. This is most critical,” said Jayasooria, who is principal research fellow at the Institute of Ethnic Studies (KITA).

Also important is that despite being this late in the development race, Putrajaya still needs blueprints to help low income groups and vulnerable minorities such as the Orang Asli and Indian communities.

“There are already many studies and submissions to the federal government (of these plans). Critical issues and concerns have been identified,” said Jayasooria, adding that what is really needed is to effectively deliver.

The same point was made by former finance minister Tengku Razaleigh Hamzah, about the aim of increasing Bumiputera corporate equity to 30%.

This goal has been around since the 1970s under the New Economic Policy, and various schemes and programmes have been crafted around it, yet the target has eluded all administrations since then.

“We were selective. Certain bumiputers were given opportunities and others were not even though they were qualified. It’s difficult to say that we will achieve this target,” Razaleigh said yesterday in the Parliament lobby, after the tabling of the 11MP.

This theme of missed targets is repeated again in how Putrajaya wants to produce skilled blue-collar workers.

According to Institut Rakyat, the 10MP target was 33% by 2015, but the country managed to only hit 25%.

“It is worrying that the government talks about how to produce more skilled workers now when it wants to reach developed status in five years," said Yin.

“This phase in the race, we should already be talking about how to market our international brands.”

The fact that Malaysia does not have its own Sony, Toyota or Lenovo reflects where it stands compared to other countries that started on the development path at roughly the same time, but are now farther ahead, he added.

“I think there is a realisation of the problem we are in, that we are stuck in a phase, but this plan (11MP) does not give me the confidence that we can push into the next stage," Yin said.

- TMI