Boy toys, sunshine and windmills will not transform Malaysian industry

 

The New Industrial Master Plan (NIMP) 2030 is disappointing and looks like so many old-style policies of the past. It is not the game changer that many people were hoping for.

First, it lacks an underlying economic rationale. Instead of a guiding philosophy of liberalisation and market-driven industrial policy we get the same old playbook of previous governments.

Four key “missions”, four enablers, 21 strategies and 62 action plans. A new implementation unit, two new finance institutions and new appointments for the great and good to an advisory council. All cascading patronage and projects rather than creating innovation opportunities.

There is little attempt to link the NIMP to the Madani Economy targets. How does it help Malaysia become a Top-30 economy, or increase female employment, or improve the wage share of income or boost competitiveness?

Second, it lacks scale and scope. The RM95 billion budget for seven years is only RM13.5 billion per year or 0.75% of GDP and will fall over time. Around 90% will be private investment which would have come anyway.

The increase in value-add from RM365.1 billion to RM587.5 billion is only 0.5% additional growth over the long-term trend. So the extra push from the NIMP is difficult to see.

Manufacturing employment is 2.35 million people, not 2.7 million as quoted in the NIMP. To raise it to 3.3 million people by 2030 is very ambitious especially since technology drivers automate manufacturing and reduce jobs. This contradiction is not explained in the NIMP.

The focus on aerospace and pharmaceuticals is strange. Malaysia’s only contribution to artificial flight is a wau bulan. Kites and strings are hardly “moonshot thinking”.

The largest Malaysian pharmaceutical company is currently in PN17 status. It will be difficult to compete with Pfizer, Astra Zenica and Rambaxy with this foundation.

Third the implementation framework looks like an old-style system of preferential allocation to middlemen, directly contradicting the prime minister’s insistence to cut rent-seeking and leakages. As we know from the past this is a real barrier to successfully implementing policies.

It appears that the nine mission-based projects (MBP) that have already been allocated lack transparency and this does not augur well. The National NIMP 2030 Council and a Delivery Management Unit (DMU) under the investment, trade and industry ministry (MITI) follow the same failed structures of the past and are as unlikely to provide effective governance.

The new NIMP Industrial Development Fund and the NIMP Strategic Co-Investment Fund replicate existing development funds. It would be much better to merge existing funds and provide a comprehensive finance eco-system than to set up more small-scale funds.

The focus on SMEs is important but 78% of Malaysian companies are micro-enterprises with fewer than five employees so scale, imagination and accessibility for these entrepreneurs will be important.

The target 128% increase in median salaries is ambitious. Only one-third of manufacturing value-add goes to employees. Many companies rely on low-paid foreign workers so to increase salaries manufacturers will have to change their business model and adopt a progressive wage for example.

Since this will be voluntary it is difficult to see how salaries will rise without major transformation of business models and mindsets, which the NIMP does not have.

The main thing to improve is the underlying vision and approach.

Fortunately investment, trade and industry minister Tengku Zafrul Aziz also announced, as an afterthought, that investment policy will be liberalised. This is necessary and positive. It would have been better if the entire NIMP had been based on a liberalisation vision from the outset.

Better still if industrial policy was outside of MITI and under Anwar Ibrahim at the finance ministry for short-term innovation and Rafizi Ramli at the economy ministry for long-term structural reforms. - FMT

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