I have been trying very hard not to write anything about the Economic Transformation Programme (ETP), the bare bones of which were revealed on the 22 September by the press.
It is just too easy to be cynical.
Target: To triple the Gross National Income (GNI) from RM660 billion in 2009 to RM1,700 billion by 2020 at growth of 6 per cent per annum - and I really hope they get the definition right - and create 3.3 million jobs by 2020. High income of RM46,000 per capita by 2020 from RM23,700 in 2009.
Total 131 projects worth RM670 billion proposed to 2020. 60 business opportunities to be "made available." RM115 billion to start by end-2010.
Malaysia number 1 regional hub for oil fields services, global diversity hub, revitalising the capital market, 114 km of rail lines via Mass Rapid Transit high-speed rail system to connect KL and Singapore, revitalising Klang River, and towards a duty-free haven for Malaysia for tourists.
12 National Key Economic Areas (NKEAs): (1) agriculture/palm oil, (2) oil & gas & energy, (3) electrical & electronics, (4) education, (5) wholesale & retail, (6) healthcare, (7) financial services, (8) tourism, (9) business services, (10) communications, (11) content & infrastructure, (12) Greater KL.
92% from private sector (RM1,270 billion), 8% from government (RM105.5 billion) to produce an additional GNI of RM775 billion by 2020 (presumably after taking away organic growth).
1. For one thing, this country has undergone a few significant transformations. We are therefore used to economic transformation and the only real issue I have is to see that the transform is for "good." What do I mean by that? A good transformation makes the economy more flexible than before, more capable of adjusting to external and internal challenges and, as a result, makes the economy stronger and more resilient. More resilient means the ability to take drastic corrections with the fading of the inefficient and the rising of newer and hopefully better champions of innovation and investment.
2. The Malaysian economy has turned from an export-oriented primary-commodity producing economy (under colonial rule) to (Transformation One) an inward-looking import-substituting foreign-investment-unfriendly regime (1970s resulting in a recession) and then quickly reverting back to (Transformation Two) an FDI-welcoming economy (late 1980s) followed by (Transformation Three) an explosion of supply-side infrastructure mega projects (early 1990s) which resulted in a financial crisis (inflation and bailouts) as a result of policy ignorance about the dangers of short-term capital flows followed a series of counter-cylical fiscal stimuli.
With the severe delay to a high income economy by 2020, there is now revealed in the ETP a flurry of projects to bring the economy quickly up to mark. Are we still stuck in Transformation Three?
3. This may be the place for me to say this. A lot of nonsense has been said about the importance of the services sector - 60% or 70% in advanced nations and 40% or 50% in developing nations and now the services sector can be enlarged in order to become an advanced or high-income economy.
The services sector in advanced nations are higher in proportion to the whole economy because their agriculture sector has disappeared due to high cost of production, and increasingly with the rise of China and India, so is the manufacturing sector. To survive, they have to use their wit which requires them to go in financial services (capital flows and corruption money from developing countries) and education (students from developing countries with bad education systems) and tourism (corruption money and windfall gains from the stock markets). It is foolhardy to compete head-on on these fronts with the more advanced economies which requires a fairly high degree of integrity and honesty in dealing with information.
In most economies especially developing economies, the services sector can only develop in conjunction with the agriculture and manufacturing sectors. It is therefore the most important that investments in these two sectors must be strong in order to pull along the rest of the economy. Without the real "real" sectors being developed, I am afraid that the "services" sectors that we are trying to develop will be related with crime, prostitution, drugs, financial fraud, social disintegration, and the corruption of standards.
4. With the infrastructure projects that are being laid out in the ETP, without any innovation or the adding of value to the economy, the projects are once again going to be financed by the future generations in the form of inflation which will only make their real income lower so that they will have to tighten their belts so that scarce resources which are meant for their consumption can be diverted to these projects. I am not against projects but they must be economically feasible if they cannot be financially feasible. The rush to meet unrealistic deadlines in order to "show results quickly" is not the way to go. Sometimes, a little hard time can be good for the soul and spur one to hard work.
A masterplan or roadmap or a project-implementation programme always smells to me a command-type militaristic economic operation. I do not know whether management consultants make good economists. The key role of a good economist is always to promote confidence and some clarity of the rules of the operating environment so that timid risk-adverse investors can be drawn out from the murky corners of their hideaways in the hope of making supernormal profits from a situation which they think no other persons have seen before. The enticement of profit from an opportunities is the trick that economists use to stimulate investments. Alas, we have to be content with a directed chess game whether the end game has probably already been decided - if they know the nature of the game that everybody is supposed to play.
I keep my fingers crossed, and wish the ETP luck for all our sakes.