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Thursday, September 30, 2010

THE 4 Es : WHAT THE NEM (ETP) NEEDS

The main thrust of the 4E formula is to 'Build Capacity' for productivity, innovation and sustainability through a one-time massive government investment similar in effort to the US Space Project, in education, research and development, political reforms and effective policies.

By Nurul Izzah Anwar, MP Lembah Pantai, Kuala Lumpur

I wish to outline my big picture impression of how to make the NEM (ETP) a success for all Malaysians as part of my continuing constructive engagement initiative.

I had written two articles on ETP, the first ’15 Questions on ETP’ and the second ‘Fantasy or fallacy: ETP 6% annual growth rate calculations?’

It was said by some observers that the opposition only critiques without offering any alternative solutions to the ETP in particular.

However, all if not most of the ideas presented here have already been suggested, and I only wish to repeat them for the purpose of outlining the necessary steps to make NEM a reality.

I hope that this ‘big picture’ commentary with suggested actions will be considered seriously and explained by the government in the upcoming 2011 Budget announcement in Parliament.

As a footnote, the ETP Part 2 was conveniently announced publicly on 21 September, which is one day after the 20 September dateline for Parliamentary questions submissions.

The Critique

Returning to my articles on the ETP, the response received from the public in support or otherwise of the position I presented is most welcomed in the spirit of free speech in a democracy. This debate is a healthy development, albeit mostly through the alternative media.

The main points to my ETP articles and the various responses can be summed up as follows:

The ETP is a huge economic development or transformation plan that has its merits.

However, the numbers and various acronyms must not be a deterrent from discussing economics especially on its impact on all stakeholders.

The possible inconsistencies and accuracy of GDP growth projections was revealed when the PM last year, at an internationally attended multimedia super corridor event, claimed he was misquoted on his announcement of the 9% annual growth target for the next 10 years of being actually 6%. Even a prominent local research house alluded to an 8% growth rate.

Some have said that if real GDP growth is 6% annually, it will only take us to the target of US$17,000 nominal GNI per head if Malaysia's population grows at a 1 per cent compound rate a year for the next ten years. However, from 2000-2010, population grew by an estimated 1.86% (Dept of Statistics). If population grows at this faster rate instead of 1% over the next decade, then real GDP growth would also have be faster by this difference.

Also, the GDP growth projections didn’t include if any, the plans related to requiring a quality workforce by increasing government spending and investments in education and research and development capacity building.

It appears that most of the EPPs and BOs were proposed by specific companies such as the RM43 billion MRT project proposed by Gamuda-MMC. The question is, will the proposed project be awarded to the proposer or open for competitive international bidding? If this is not clarified, than the EPPs and BOs would only be a self-serving exercise for certain businesses.

To illustrate this point, would Pemandu be interested in my RM500 billion atmospheric dome proposal covering Kuala Lumpur against climate change or as a friend suggested a scaled down RM50 billion eco-project utilizing gigantic fans to blow existing pollution to our neighbouring countries?

As the proposer, all I need is an official award letter and a parliament act to set a price on the atmosphere along with a government guarantee letter to help me raise the needed DDI and FDI funds. My RM500 billion dome would increase GNI substantially and become a center of excellence as we would be the first in the world to do it. Isn’t this truly innovative? So let all Malaysians submit their innovative proposals to Pemandu for consideration, which can be named RPP (Rakyat Proposed Projects).

Furthermore, if most companies perceive that they do not have a fair chance to compete relative to favoured companies and with a lack of transparency, then this will have an adverse impact on investor confidence. For example, can we have more details on the 1Malaysia Development Fund to know if this exercise to acquire public assets is in the public interest?

The proven track record of not achieving the previous Malaysian Plans is also troubling. For example, 8th Malaysian Plan target of 7.5% growth only achieved an average 4.5% growth while the 9th Malaysian Plan target of 6% growth as of date is at an average 4.2%. This brings our past 10 year historical average growth to less than 5%.

The need to expand participation for national consultation should not be limited to various ‘laboratories’ involving big business, professionals and civil service inputs. The ordinary rakyat especially the rural and urban poor, youth, workers and civil society were not sufficiently engaged on the ground. Some may be intimidated let alone can afford to attend these public participation events or ‘Open Days’ in conference halls.

The widening income inequality and limited higher education opportunities, which is a contributing factor to widening the gap must be addressed adequately. Economic policies may have reduced the absolute poverty rate but they have also worsened the distribution of income. Thus, the bottom 40% of all households accounts for 15% or less of household income while the top 20% of households account for 50% or more.[1] Sabah, Sarawak and East Coast states bear a disproportionate number of hardcore poor, poor and low-income households.

The most fundamental determinant of any competitive economic plan, which is innovation, requires freedom. How are we free to be creative when our national cartoonist is arrested for humoring us?

Rushing to conclude a matter of national importance just to meet the 2020 year milestone and changing big plans introduced previously such as economic corridors, that are later repackaged by new Prime Ministers only adds to the inconsistent policy making culture (some say flip-flopping) that undermines confidence in the plan’s success.

The plan appears to works backwards from developed country status to high-income status in 2020. This is the source of the problem, silly as it sounds. The impact of this is not only to make the targets "costly, confusing and convoluted" but also conjectural.

Even Tun Dr Mahathir Mohamad recently alluded to the possible failure to achieve Vision 2020’s objectives, which is the premise for the NEM timeline.

Overall, there is much room for improvement in making the ETP viable, realistic and sustainable. And to do that, I now shall outline some suggestions in the form of a formula.

Formula for NEM (ETP) Success

I am providing a ‘4E’ formula to keep in line with the many acronyms introduced by the government recently. To be fair I find acronyms useful as mental markers to organize the numerous concepts needed to frame a big idea such as the NEM.

The ‘4E’ formula to make NEM a success is; Education + Empowerment + Efficiencies = Economic Growth (NEM).

The main thrust of the 4E formula is to 'Build Capacity' for productivity, innovation and sustainability through a one-time massive government investment similar in effort to the US Space Project, in education, research and development, political reforms and effective policies.

And on balance with the need for huge investments, we also need to reduce waste through efficiencies and transparency so that every ringgit invested in 'Capacity Building' provides the highest returns for the benefit of all Malaysians

First E: Education

The NEM already stated the need for at least 3.3 million quality workforce. This includes for more than half to be first degree and diploma holders.

To produce quality workforce requires quality education.

Before I proceed, I would like to note that the recent announcement by the Deputy Prime Minister who is also the Education Minister that vocational education will be revamped is commendable.

The suggested actions to be taken are:

Depoliticize Education

The Deputy Prime Minister’s recent statement of his inability to take action on the case of the two principals for racist remarks due to administrative procedures may have an unintended consequence of reaffirming the separation between politicians and the civil service.

It is hoped that this ‘depolitisation principle’ includes all government ministries and to a certain extent also to the judiciary and other institutions. I hope it is not selectively applied for political expediency only.

Removing the Universities and University Colleges Act (UUCA) will add towards improving the innovation culture and quality standards of tertiary education to meet NEM objectives profoundly.

· Pre-school, Primary And Secondary School Enhancements:

Offer Pre-school education to all Malaysian children

The current education NKRA achievement where 54,569 children have benefited from 1,358 pre-school classes is a step in the right direction.

However, it should be accelerated to cover all children numbering at least 1.5 million for three pre-school age group cohorts.

Enhance teaching capacity

- Hire more teachers and assistant teachers by 50%

- Upgrade teacher qualification and professionalism

- Increase salaries by 50%

Enhance school curriculum

Move towards a critical and creative thinking approach including for examination questions.

Increase School Hours

Adding 45 minutes daily can increase academic achievement significantly.

Single session schooling

Build more new schools and additional classrooms in existing schools. Also continue to fully equip them with ICT infrastructure.

· Tertiary Education Quality, Accessibility and Affordability

In summary the following should be considered for tertiary education excellence:

-Greater Autonomy

-Massive Phd Programs for Academic Staff

-Increase Research and Development capacity

-Increase Salaries

-Hire Foreign Academic Staff Talent

-Introduce Ranking System

-Convert PTPTN loans to scholarships

-Provide more scholarships and subsidies

All these actions would require political will and increased public financing to succeed.

The political will to depoliticise and democratize education along with repealing the Universities and University Colleges Act (UUCA) will signal the government’s sincerity and commitment to make the NEM a true success for all rather than just for a few Malaysians.

From a public finance perspective, even if the above measures add another 4.5% to the government’s 4.5% average education spending for a total 9% of GDP annually for the next 10 years, this will indicate to the people and the international community of our determination to meet the NEM objectives.

As a possible source of funds, I had proposed earlier that 30% of Petronas annual profit be a mandated contribution to a National Education Fund. This also would include implementing an NEP Bumiputera Equity Redistribution Plan (Quota – in a –Quota) where 25% of current Bumiputera equity ownership of both publicly listed or privately held companies be sold at par-value (which is the official equity ownership calculation criteria) to the same National Education Fund entity.

Second E: Empowerment

One of the most if not the most important key success factor for NEM’s success is innovation. And innovation needs freedom. Freedom can only come from empowering society.

To empower society, I had suggested that we need to add a fifth pillar to the national transformation agenda which is already based on four pillars of 1Malaysia, GTP (Government Transformation Plan), ETP (Economic Transformation Plan) and 10th Malaysia Plan, to be called the PRP (Political Reformation Plan).

PRP includes repealing all anti-democratic laws, respecting separation of powers, reforming national elections and restoring local government elections, returning the judiciary’s and other state institution’s independence, fighting corruption, ensuring a free media and by abiding to the true meaning of our constitution.

By doing so, I am sure that the international community specifically the foreign investors will find it attractive to return and contribute more than the 25% FDI needed to finance the ETP.

Third E: Efficiencies

There are three efficiencies that must be considered to make NEM successful.

They are Government Service Efficiency, Market Efficiency and Social Security Efficiency.

  • Government Service Efficiency

The current Government Transformation Plan (GTP) already addresses this matter to a certain extent.

However, I hope that the initial trend of depoliticising the civil service inadvertently introduced by the Deputy Prime Minister in regards to the two principal racist remark affair shall be a permanent feature to transform the government as planned.

I would also suggest that more talented Malaysians be recruited into the civil service by making it more attractive with market-rate salary and benefits. I believe quality should be the main consideration as we already have quantity with a huge civil service.

We also need a significant and empowered technocracy (i.e. professionals with specialized skills just as in Singapore, Taiwan and Korea.) There is no point in developing our human capital development to a very high level in these areas if they are not then placed in senior decision-making management and administration positions. It is possible to make bureaucrats out of technocrats but not the other way around. They must be empowered, evaluated and promoted based on achievements and track record.

Another important factor that will improve government efficiency and accountability is to return the Local Government Elections immediately. This third tier of government will provide a faster response by the government in delivering services for the real needs of the ratepayers.

  • Market Efficiency

Information or rather the quality of information is necessary for market efficiency.

This would include timely, accurate and consistent information on policy, events and plans.

One of the ways that information is reliable is to allow for a free media.

Therefore, as a step forward, I hope the government will allow more permits for daily newspapers to be approved including my own permit for Utusan Rakyat.

Structural distortions by favorable policy and selective benefits to certain sectors, economic leakages, corruption, opaque procurement practices and inconsistency policy statements will never make NEM a success for all stakeholders.

  • Social Security Efficiency

The households who live below the poverty line must be assured of equitable assistance from the government. This includes targeted subsidies for essential goods and services such as health and education.

As a first step it is necessary to review the Poverty Line Income (PLI) which should be RM1,886 rather than the government’s PLI average of RM800 per household . This would ensure existing policies and programmes are realigned accordingly to provide an effective safety net for the people.

Another step is to implement a living wage of at least RM1,500 per month.

And to ensure affordable living expenses, the government must enforce anti-monopoly laws across all sectors combined with fighting corruption and white collar crime that add cost to prices for consumers.

Fourth E: Economic Growth

I fail to see how Education, Empowerment and Efficiencies with the suggested actions are not crucial contributing factors for Economic Growth.

The absence of policies, funding and political will to implement these factors will only add to the current skepticism in the NEM initiative.

I hope that our economist and policy makers will add to this discussion with more details.

I also hope that a more constructive debate on these factors will take place with all stakeholders especially in the next Parliament sitting.

Furthermore, I would even dare to suggest that implementing the ‘4E’ formula will definitely benefit the current government’s standing and make the opposition more competitive for votes.

This is a price I believe the people and even the opposition should be willing to pay for a better Malaysia.

The cost of doing the right thing is nothing compared to the cost of a failed NEM plan leading to a failed nation.


[1] Richard Leete, "Malaysia: From Kampung to Twin Towers", p. 169

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