Tuesday, March 30, 2010

NEM: PM's Keynote Address at InvestMalaysia 2010

I was supposed to attend but didn't make it due to short notice, but managed to catch it live on TV just now.

First impressions:

1. The coverage ranges from poverty eradication, price distortions, middle-income trap, social safety net to high-income goal, political will, change, innovation, Bumiputra policy, investments, EPF, institutional change (MIDA) listed companies, GLCs, divestments, and property development. It is too comprehensive to be focused.

2. I feel at times that the first part of the speech was drafted by an analyst, which is a bit impersonal, while the latter part is a bit more gutsy and more categoric.

3. I feel that poverty cannot simply be eradicated by just raising the income level of the poorest section of society to solve the poverty problem. Poverty is inherent in the capitalistic system that we are in, and therefore needs a system to over-ride the system defect. A higher-income economy does not necessarily mean that will be no poverty. Widening the social safety net is one, but it must be seen as a systemic issue about helping those unable to participate in the mainstream.

3. The real juxtoposition is between change/high-income policy and the Bumiputra policy. There is so much psychological baggage from the latter that it is going to distort the thinking on economic policy. I suppose it is this politics that is hard to shake off. The Bumiputra policy has graduated out of the poverty discussion and is now concerned about rights in taking a cut in the pie. The PM talks about being more transparent in the tender process for Bumiputra where the definition of Bumiputra is now more inclusive of other Bumiputra. It is as lapis a cake as you can get, without the cream or core or investors of the economy.

4. EPF is to divest into foreign markets to make way for foreign investors to come to the Malaysia stock market. It is as silly an idea as you can get. I blame the advisers. I thought the original intention of having an EPF is to fund local development in order to accelerate the growth of the local economy. If you put an accountant in charge of the EPF, you are going to get a non-economic strategy.

5. The change/corporation of MIDA into the Malaysian Investment Development Authority is a step forward in removing the excessive power from the MOF who deals with all things strategically and financially important for the local economy. The trend should continue to remove more authority from the MOF, in lieu of the MOF authority not removed from the PM. (Would this mean that the MIDA CEO will now be half an MOF?)

6. When a PM talks about economic policy, he should just focus on policy. The moment he gets into specific cases, such as the divestments by GLCS and the nature of the divesments, I think we are zoomed back into the same old matrix.

I could have gotten some of the points off, so let's see what the reports say and see if I need to correct myself later.


walla said...

It's actually a speech (http://is.gd/b6msD) distilled from a document:


That's interesting because it's just part 1. Where is part 2? Perhaps, it will come about after public inputs on part 1, or maybe it's the other pillar of government transformation.

One wonders how the formulation of the 'model' if one can call it that would have turned out differently if the NEAC had also members who have had to go through the grind-mills of turning around failing businesses and creating blue oceans, transforming industrial policies and lifting strategic ideas into executable frameworks at national scales in tandem with market forces in actual operation in successful enterprises in other countries, advanced and fast-emerging.

That would have put in more bite into both document and speech, and they may then even be able to bridge the gap between what the rakyat had expected and what was delivered...because when we hear of things like corporatising Pos Malaysia, developing a landbank in Sg Buluh and floating two Petronas subsidiaries, it's difficult not to conclude that there are neither big ideas nor powerful thrusts to fight the calamity before us.

But then again, it would depend on the perception of where we really are.

Some will say we are in calamity, especially since we suddenly said we have a middle income trap; notice the first official statements of our economic dilemma were only made a few months back - after fifty two years of economic planning and nation-building.

Others, as the speech and report have extolled, will say we have done well. Which however begs the question why we then need a new economic model which after comparing with all the past documents on national policies, economic thrusts, master-plans and blueprints, reads no differently and thus is neither new nor economic nor a model ..if we want to raise the bar.

Let's put in the flavor first. Say it's neither a calamity nor a done-well. In this case, wouldn't it be sagacious to assume it is closer to a calamity than a done-well so that sufficient temperature will rise in everyone to roll up sleeves and put gray cells to work to try and create really powerful thrusts and blue oceans....simply because our history tells us that we don't have a single program, project or enterprise which has ever succeeded long-term? And that's because the drivers lost their steam and map after each launching?

Now, take corporatisation of Pos Malaysia. Anyone who has been following world trends will tell you that's an old topic. Corporatisation of postal services was studied to death in Europe, even Japan, as far back as twenty years ago. Because when the dotcom phenomenon started at that time, people already knew postal services would have to immediately reengineer themselves since people don't post when they can click. That's called a technology disruption of bricks-and-mortars. So how can an old topic add-on the announcement that Khazanah will divest from it make for an illustrious example behind the thinking that goes into a presumably comprehensive new, economic, model?

And we should really stop talking about developing real estate. Because when we don't, that's just hinting the price of land in Sg Buluh is going to go up 'officially'. That's not even innovative. Because it's the same old property as haymaker syndrome.

And this thing about listing Petronas' subsidiaries - aren't there already two listed in the names Petronas Dagangan and Petronas Gas, so where's the beef?

Probably as much as saying EPF is going overseas.

walla said...

All these inklings are things one would expect to be part and parcel of the operational tactics of any company, small to big, and not part of the foundation that will go into an economic transformation as a pillar standing on two master plans to come. They are things a director will tell his staff to get on with it as he changes into suitable garb for his usual friday golf session, with the mandate he wants it done by monday lunch.

That's the real pace of things in the real world. Or how it should be, anyway, in other places which are jiving.

The telling thing in the speech was the invitation to Malaysians who have left the country to come back. Rather than just say that, why not admit with reasons why they had left in the first place and then put those reasons into a track that leads to a real economic transformation.

Once we have that as direction, a statement can then be which will be new and definitive. We can then say this country's economy will henceforth operate according to best-of-breed global practices with the objective to achieving sustainable economic success and everything will be thrown behind that thrust to make it work once and for all which means that deinvesting policies will be decoupled and addressed in such ways as not to crimp expansion, progress and modernization not just of assets but also of mindsets.

Then, from that totem pole, other statements can be made - recognizing that poverty and marginalization are banes that transcend all communities and localities, a parallel program will be instituted with equal measure of forcefulness to make sure that every able person in such straits will be given all available avenues to participate extensively to build his or her own future in an open-economy that rewards according to skills and performance. And you can cast the social net to include 'participation'.

Once they have both out of the way, then they can talk about open bumiputra tenders and how creating opportunities will not deprive those who want to participate but are lacking in initial start-up requirements. Which means the big ones who will be getting the contracts will have to bear some corporate economic responsibility (CER) that like CSR will have them mentor and motivate the smaller ones so that they will not be left out. In other words, affirmative policy applied BY and WITHIN the bumiputra community ONLY. Then the others can partake in enlarging the national economic pies on their own steams without either side feeling it is a zero-sum game to no one's benefit.

Now, why was all this not said?

If we read between the lines of what was said and what was documented, the nagging conclusions are that the govt is broke and they have no idea how to dig the economy out of the quicksand.

The main statement they are making to themselves is that subsidies must go. That confirms treasury is tight which makes one wonder who made the decision to plow one hundred million into Tasik Kenyir and who approved the lawatan sambil belajar of the Melaka state govt so soon after the former Selangor MB had done one to no result. While citizens run around looking for hospital beds in Sabah.

walla said...

The worrying thing is whether they have calculated carefully the timing of removal of subsidies versus whether the populace can float above water the moment the subsidies are removed.

When they talk about things like introducing GST with a one-time inflationary spike, they have borrowed observations from other economies which have done and faced so. Are they sure the real household disposable income situation here is similar? What about externalities, for instance another global dip?

The key things that are not addressed in fuller flesh seem to be:

- human capital: how to upgrade and update it;

- innovation: how to spark it extensively;

- mindset change: how to change all once and for all;

- probusiness environment: how to beat the rest in making it stick;

- promodernization society: how to envision it and overcome resistance to it;

- separation of political agenda of voter recruitment from the process of framing economic models;

- removal of political agendas from economic implementations: how to make sure their own apparatchiks don't interfere in the roll-out of both government & economic transformation pillars and the floor of the two master-plans; and needless to say,

- all the other humdrum things like transparency, accountability, freedom of the press, independence of the judiciary - and the cleaning up of all stables of past excesses and corruptions - with return to the state of all ill-gotten gains purloined from the people.

Because when you read of things like the following, it is impossible not to conclude they are still missing the forest for the trees:

"Among the measures proposed by NEM are:
* review the education system to shift from rote learning to creative and critical thinking;
* increase emphasis on reintroducing technical and vocational training colleges;
* enhance English language proficency;
* deliver high-quality education within reach of all localities;
* upgrade skills of the Malaysian workforce with continuing education and training;
* establish a safety net for displaced workers;
* formalise international quality standards and skills certification;
* allow wage levels to be reflective of skill level;
* review existing programmes to attract highly-skilled Malaysians to return home;
* offer permanent residence for ex-Malaysians and their families;
* centralised oversight of foreign labour and expatriates to enable coherent practice; and
* simpler work permit and immigration procedures."

....because these are the routine things which should have been done long ago as part and parcel of routine organizational improvements, not as part and parcel of transformational thrusts.

...which means the tempi by which govts do things should also change; and the only way they can change is to put their own limitations for change into the model.

hishamh said...

walla, it was announced earlier that the NEM will be introduced in two stages - part I outlines strategies, part II (in June in conjunction with the 11MP) will detail the actual implementation. What we have now are just broad policy strokes, not action plans, EPF/Khazanah/Petronas announcements notwithstanding.

I'm encouraged to be honest - the language of the document (the speech glosses over a lot of the finer points) is refreshing in its candor. I don't think I've read a more hard hitting Malaysian government document since the original NEAC back in 1998.

Some of the implications of the proposals will make a lot of people very unhappy - Perkasa and MTUC for starters.

semuanya OK kot said...

For me-too greenwash, we have Sustainablty. A letter to a newspaper pointed out that even as Earth Hour was being drummed up, thanks the IPPs were producing 142% of the baseline requirement of electricity, meaning that 30% of every unit of fuel expended was wasted. Actually, we only know that they are paid for 142%. This symptomatic of the cult of secrecy, authoritarianism and corruption we have all learnt to be mealy-mouthed about.

Perhaps we too have to wait for things to get worse, as in USA, before we remember such things as Interpol and the existence of tax havens aka offshore banks.