Same old mistakes in 12MP, but few solutions

 

From Murray Hunter

What is clear in the 12th Malaysia Plan, launched by Prime Minister Ismail Sabri Yaakob recently in Parliament, is that Ismail didn’t have much time to influence the direction of the plan.

Ismail’s slogan of Keluarga Malaysia (Malaysian Family) looks to have been hastily placed within the preface, introduction, and conclusion of the 532-page document.

The report promises 14 game-changing approaches to transform Malaysia, with implementation overseen by transformational leadership, promising the whole nation will be mobilised to achieve the mission of a prosperous high-income, sustainable low-carbon economy that is globally competitive.

The reality couldn’t be more different

Very little focus is given to the devastation of the Malaysian economy by the Covid-19 pandemic. Economic management is perpetuated along the lines of former Malaysia Plans, promising much more government intervention.

The government has also selected potential industry winners, which in the past had led to so many dismal failures, and taken the same approach to poverty eradication as past five-year plans.

Not relevant to the current situation

The reality of the document is probably best seen through the statements about Bumiputera equity made by Ismail. The government has Keluarga Melayu (the Malay family) more in mind, than Keluarga Malaysia, while the Plan highlights the economic and social division that the country has been steered towards over decades.

The major flaw of 12MP is that it is just not relevant to the current situation. By the government’s own admission, the data doesn’t exist. Statistical data time-lag is hiding the real problems. Calling the current situation a humanitarian crisis, with those in need of food and basic staples growing on a daily basis, is not an under-statement.

The 12th Plan appears to have been guided by a small group within the Economic Planning Unit under senior minister Mustapa Mohamed, and consultants, with working groups selected from within the civil service.

It is basically a product of guided focus groups working in serviced five-star hotel seminar rooms, with white boards up in front, and is a stark contrast to early five-year plans which analysed the economy and arising problems with candour, coming up with solutions.

Observers of five-year plans say the standard declined sharply from the 9th Plan in 2011, when consultants began being utilised heavily.

Big government getting bigger

Rather than being rakyat or people first, the specific agenda is about increasing the size and influence of the government within the economy, providing justification for a large number of IT and database contracts for a select few consulting firms, amid continuing positive discrimination towards Bumiputeras.

The 12MP is about big government, big projects, and enhancing the power of the already wealthy elite.

The 12MP will end up increasing income disparity. The focus on racial income disparities hides the massive disparity between the Malay elite and other Bumiputeras.

The real issue is that the B20, or bottom 20% income earners, share only 5.9% of the national income, while T10, or top 10% income earners, share 30.7% of national income. The 12MP will do nothing to reverse this unjust situation.

Other unfeasible policy concepts should be scrutinised. These include the promotion of Industry 4.0 to the micro, small and medium enterprise sector, when most of Malaysia’s 1.15 million MSMEs are “hand-to-mouth” enterprises doing low-value manufacturing and trading.

Most of these enterprises are unable to digitise and digitisation in most cases would provide marginal benefits. The 85.5% of Malaysian SMEs in retail sales would be able to purchase “off-the-rack” retail data-processing solutions anyway.

More “little Napoleons”

One of the most alarming features is that the issue of a bloated civil service was not canvassed but the 12MP recommends the creation of new departments and agencies to monitor and regulate the economy although it needs less government intervention and regulation to assist MSMEs to become globally competitive.

The recommendation for a flatter organisational structure within the public services will further increase the power of department heads, stifle creativity, and increase the incidence of corruption. A flatter organisational structure will be a breeding ground for more “little Napoleons”.

It is difficult to see how the education system can be transformed if “connected people” continue to be appointed to key positions in the ministry and universities. Nepotism will not reform education.

Sustainability is another area that has been whitewashed. For example, there are no financial figures on the commercial viability of biodiesel. Under the current industry structure, the production of biodiesel would be unprofitable. Likewise, solar and wind power generation would cost substantially more than present production methods, leading to higher prices for electricity.

If consumers pay the extra costs for green energy, wealth will be redistributed from the poor to the equity owners of the energy industry.

Contracts for consultants

While the 12MP talks about sustainable SMEs, it is totally quiet about how to revitalise those SMEs in the tourism industry now in dire financial straits. The issues shouldn’t be about transforming SMEs into sustainable Industry 4.0 model enterprises, but keeping them afloat until the economy recovers.

The crux of 12MP’s vision for sustainability is to increase data collection, hand out contracts for consultants to create the software for smart cities, and increase regulation of SMEs to require more compliance.

Carbon pricing taxes will increase the cost of running SMEs and increase administration required by these new bureaucratic measures.

The 12MP has been much criticised for the harsh new equity regulations mentioned in the prime minister’s speech introducing the plan.

Government-linked companies (GLCs) currently control over 40% of public-listed company equity on the Kuala Lumpur Stock Exchange. This equity could be privatised to distribute equity more equally within the community.

New industry of overseas proxy-holders

Instead, the government has decided to force successful SMEs within the transport sector to divest equity. This is not redistributing equity to needy Bumiputeras, only those already wealthy.

The effect of this regulation is to create a new industry of overseas proxy equity holders who are being given tax benefits from the Malaysian Investment Development Authority (Mida).

Public healthcare recommendations are very disappointing. The increase of intensive care unit (ICU) bed capacity in public hospitals should be a top priority. There are only 1.6 hospital beds available per 1,000 people and 3.3 functioning ICU hospital beds per 100,000 people.

In contrast, Italy, which last year ran out of ICU capacity due to a massive outbreak of severe Covid-19 cases, has 12.5 ICU beds per 100,000.

A looming disaster in public health

The high incidence of diabetes, hypertension, obesity, heart and respiratory diseases and cancers among the population makes many Malaysians extremely vulnerable to contracting Covid-19 severely. Another vulnerable demographic is that of those aged 65 or above, comprising 7% of the population, or 2.23 million.

These factors have made Malaysia a disaster waiting to happen, not mentioned at all in the 12MP.

The fact that Malaysia was not able to locally manufacture a vaccine is testimony to the failure of government policy implementation, something that is most likely to happen again with 12MP plans to create an aerospace cluster.

There is nothing in the 12MP document about how RM400 billion will be raised to pay for implementation. Malaysia is currently wrapped in anger over the revelations from the Pandora Papers, showing how elite Malays, including parliamentarians, business people, civil servants, children of former prime ministers and members of royal families have hidden their wealth to avoid paying tax.

Not much for the rakyat

Over RM1.8 trillion in illicit outflows are reported to have left the country from 2005 to 2014, placing Malaysia fifth among all countries, after China, Russia, Mexico and India.

There have been calls for a wealth tax, which the 12MP has not mentioned even though one of its objectives is to redistribute wealth.

The current public perception is that 12MP has been tabled to benefit Bumiputeras, more than the general Malaysian community.

Members of the Bumiputera community have publicly acknowledged and welcomed that. There is not much in 12MP for the rakyat or people, but plenty of money allocated to fund connected consultants and contractors in IT and digitisation. 12MP is very much Keluarga Melayu (Malay family). - FMT

Murray Hunter is an FMT reader.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.