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Sakmongkol ak 47

ariff.sabri@gmail.com

Wednesday, 31 March 2010

Some initial thoughts on the NEM


Ladies and gentlemen, Now the NEM.
The PM has outlined the main aspects of the NEM. I was waiting to read strategies to unleash the entrepreneurial energies of economic agents besides the same old players. Private sector means what? Does it mean the same old companies, friendly parties or the faceless multitude of ordinary business people? Since 2004 for example, Khazanah has been divesting its holdings in many companies- may we know who and on what criteria? People can say all sorts of things on paper- using highly technical financial jargon which actually means they were hiding something.
What I take as entrepreneurial agents to turn this country into a nation of high-incomers are the large number of businessmen- the SME people, research of which has shown are more productive and generate more income that the big guns. These are the people who have been excluded from participation simply because they only have technical skills but no patronage and no intimate relationship with powerful decision makers. So why do we pander to the wishes of the super leaguers?
I was reading some comments given by ex banker Amir Sham who is head of the NEAC. He was telling that maybe some contracts should be given to a certain group of contractors not including the big leaguers. I would support the idea by pushing it a bit further. Why don't for the next 5 years, we declare that all listed companies engaged in construction are not to participate in government mega contracts? Or the big suppliers are excluded in the next 5 years to participate in big government supply contracts. You have made large profits previously and you can hold on for the next 5 years. This would allow the middle and even top bottom leaguers enough room to prove themselves to become big leaguers. Such an interim policy of 5 years would also re-distribute contract opportunities from the current big leaguers to others.
Amir sham shouldn't say- we leave it to the government to do that. As head of the NEAC- say it and say it loud what needs to be done lah taukay!
Then we wouldn't hear the stomach turning spectacle- Yeoh Teo Lay this and that, GAMUDA this and that, Syed Moktar this and that, Berjaya this and that.
Let's see whether the big leaguers, without the traditional patronage can be creative and venture elsewhere? Can they do that? They must- after all smaller contractors have been excluded from participating in big contracts.
Remove all the classes in contractors. In 5 years time allow every contractor, on a Classless basis to compete on equal footing. I am sure the up and coming and qualified contractors can also do strategic partnership. Many of the smaller bumi contractors for example are highly trained people- engineers and technicians.
I have written a number of articles on what I wanted the NEM to be. At that time, we had no inkling how the NEM will be. I started from some key phrases the PM used. These included competitivess and creativity. I had to re-read what Porter said about competition and competitive advantage. The key word of creativity pushes me to re read Joseph Schumpeter- creative destruction.
As I look into the NEM, I will have to say it's not actually a new construct at all. It's just a grandiloquent way of saying, we will do it differently. The PM said it himself:-
"I pledge this: we will work tirelessly to develop and implement the economic reforms that our nation needs to grow, our businesses need to succeed and, above all, for our people to prosper," he said. "Some people are questioning the need for urgency to break the habits of the past. Do not be fooled. We need a new way of doing things. We must act now to position Malaysia for the future. We need to have a sustained and consistent big push if the reforms set out today are to gain momentum and help us achieve our goals."
I do not doubt the sincerity of this PM to carry out what he has said- a new way of doing things. This would certainly demolish the hopes of those hankering for a return of the inglorious past- where patronage and who you know rule the day. Since 1981, the driving force behind almost all businesses has been the dubious factor- hey do you know this pengarah, this ketua pengarah, this minister and the PM?
It is precisely that weakness that has created and sustained a select group of rent seekers and patronage hunters. Their success depended less on meritorious skills and expertise and more on harnessing the right political networking relationships. Success depends on sharing privileged information which excluded the real entrepreneurs out there.
The new model must strive to be closer to a market driven economy in the sense that it must introduce system that many free marketers believe- placing wealth creating assets closest to actual economic agents. Hence I welcome an assurance that our GLCs right from Khazanah to state owned companies will be divesting their holdings. Allow private sector, entrepreneurs to develop the assets and apply better work ethics and different motivations.
Khazanah for instance will sell 32 percent of its stake in Pos Malaysia but let's do it on open tender basis. But not before Pos Malaysia account for its humongous loss of over RM 500 million. Then not only must it be privatized, we must also make those responsible for the losses accountable. Do not allow those responsible for the losses to come back with a MBO plan or any business plans for that matter.
If it's not tenable to have one Pos Malaysia let's do a Mama Bell and Papa Bell on them- break it down to regional Pos Laju. Let them compete among themselves and see who can offer better services.
Why don't we allow online tendering so that people in Khazanah or decision makers don't come face to face with bidders until they are called in the final round? Hands off and on line tendering will allow the government avoid being accused of cronyism or patronage.
I have long advocated the freeing of the market from the clutches of state owned companies. In the absence of competition for example how do we know whether the SOE's operate on operating efficiencies or are just passive beneficiaries of the nature of the product? For example, in Pahang there are a few SOEs which are given monopolies in developing land for palm oil. I suspect, they enjoy good earnings simply because of the natural price of the product. Palm oil has a good price. All you need to do is to ensure you produce a certain quantity and sell at the good prices.
We really don't know whether this is due to productivity, efficiency, best practices or what? Because as soon as you compare productivity with private companies, then you will realize that SOEs have not been efficiently run. Their comparative productivity is lower than many private owned companies.
As long as you allow SOEs monopolies, you impose the crowding out effect. Genuine investors are sidelined from participating in certain economic segments. SOES get priority in many areas- land allocation and application, financing, guaranteed credit etc.
On these points, I have advocated when I was a state assemblyman, the closure of several GLCs and their subsidiaries. If they are not able to compete with even some upstart companies, while they have been receiving a variety of privileges, they might as well close down. Naturally, those suggestions were not well received by the CEOs of the various SOEs.

30 comments:

Anonymous,  31 March 2010 at 07:51  

Dato
You give contract to all contractors just to play politics. You want more and more buildings to collapse. Now only roof tops collapse and when you give all contractors main con job, all buildings will, read my lips, all buildings bound to COLLAPSE.
You politicians stay out of construction sector. In fact all politicians should stay out of everything. Don't and STOP doing things that will encourage corruption, political patronage ( also part of corruption ). Why BUMI contractors are the main concern. Is it politics. Any bumi who wants to engage in buisness should be given encouragement only @ through training and not straight away award contracts.

Anonymous,  31 March 2010 at 08:50  

This PM is all talk and I will never take him seriously. For one, there are many in his ranks who want to pull him down, literally.
The civil service and Ibrahim Ali will pour could water on the NEM.

So what happens to the UMNO sponsored Class F contractors. What about APs? What about appointments of VCs, head of public institutions etc.
WHAT ABOUT CORRUPTION IN HIGH PLACES?

vinnan,  31 March 2010 at 10:14  

I hope you are not advocating what Lim Guan Eng is doing in Penang with regard to government construction projects.The Malays in Penang may be able to withstand the rigors of competing fairly for projects but I doubt you will find this 'steel' in the Malays outside Penang. 20 years ago I worked with a bunch of Penang Malays who puts to shame the so-called Chinese work ethic in Malaysia.

Richard Cranium 31 March 2010 at 11:04  

The overall ideas are out. Like what you allude to, Najib needs to execute. And he cannot let this dirty work be done by his minions.

Otherwise, its deja vu all over again.

Anonymous,  31 March 2010 at 11:34  

Salam Dato Sak,

As Mr. PM quote -
"Coca-Cola has announced a 1 billion Ringgit investment that could create up to 2,000 to 3,000 jobs in Malaysia. Maxis’ multi-billion dollar IPO is the largest ever in Southeast Asia and represents the sort of entrepreneurial vision that I see every day in our Malaysian companies."

I don't really see the significant of this, COKE so what?

We want better public transport, guaranteed open quota, no race quota, meritocracy!

Its all hype lah

Dejavu all over again time Tun Dollah Badawi

-Ikan Tongkol-

chinaman,  31 March 2010 at 12:01  

Dato,

Chinaman ada pegi dengar itu PM punya NEM semalam. Its all full of shit, motherhood statements and nothing else. One moment want to be fair and merit based the next moment contract sama melayu saja kasi. One moment no more rent seeking next moment RRI pun dia mau kasi jual. Apa konek ini? Do we need more property development project? One moment "we nd to act now and decisively" next moment "we now take a consultative approach, check with Ibrahim Ali, datuk, nenek, ah chong ah kow, samy sama kupusamy dulu.

Not a since concrete proposal. IPO Petronas co? Sell Pos Malaysia? What the f--k. And RRI scheme is just a ploy to take money out of EPF. EPF has too much money just give back to contributors la let them spend as they wish.

This is worst that pak lah, at least pak lah dare to go after tun, our friend has no clue and balls.

kuldeep 31 March 2010 at 12:37  

Dato Sak,

The fact is politicians cakap2 only.There is no moral and ethical standards..mau survive only.

My friend got a contract and completed a job for a LKPP subsiadary in the nineties.He participated in the tender because LKPP assured him that LKPP will put money into the subsiad cos its an important industry.Anyway it was a competitive open tender and he got the job.

Sadly the subsiad went bust due to various reasons ; one of which is LKPP did not put in the promised funds.

The SOE defaulted on payments to my friend...who eventually sued and got a judgement.

BUT the LKPP subsiad is now bankrupt>>thus its only a piece of paper.

Of cos,technically LKPP have no legal liabilities..but,morally and ethically..they do have.My friend lost millions cos he needs to pay all suppliers and subcons>>the least MB could hv done is to compensate for direct losses.

But,Dato, ALL politicians only talk talk and focussed on the plus side of their own image,power and money balance sheet.If you can't offer any of these..they will say they got no power,can't help etc. BUT if you can give value add to any of the three..only then they jadi creative.

So the publicised NEM,GTP wateva is all lip service for unimportant ppl like us..the distribution of money,wealth and opportunities is already defined in the more important limited circulation "Real 1NEM" situation paper.

kuldeep 31 March 2010 at 13:00  

I can't really understand why the COKE investment is such a great thing???

Previous,they were bottling in ShahAlam..by F&N.Thus,all the work inputs,logistics etc etc in place and already contributing to our economy.

But of cos,COKE have to share profits with F&N.F&N is a PLC>>again some of the profits will filter down to M'sian investors of F&N. (I think S'pore family is majority owner)

Now,COKE terminate the bottling agreement and go out on their own...

So wats the gain for Malaysia?

>>myb the construction (RM 1 billion is capex not local inputs)
>>unless more then ever growth in COKE sales..resources/supply chain same same
>>unless F&N can fill gap left by COKE some ppl may lose jobs

So..I m no economist so too dumb to see the benefits and why its model of NEM?
And the other model i.e MAXIS relisting??? it escapes me.

Iran hv no COKE but has their own brand (Parsicola and ZamZam Cola>>and rigorous blind testing with my 4 kids..they kinda not notice the difference.

But Iran is backward..not the right model for us on the route to High income.

PH Chin 31 March 2010 at 13:20  

Dear Dato'

It's not surprising with the productivity of the SOEs in Pahang. Bearing in mind that monopoly breeds content.

And the worst enemy of productivity and competition is content.

walla 31 March 2010 at 14:42  

1

In no particular order:

- Najib needs to beef up his communications strategy.

There was not enough pre-messaging that his speech (http://is.gd/b6msD)is just a broad framework, abstracting from the NEAC report (http://is.gd/b6gfA).

People were expecting a definitive action plan (http://is.gd/b7zjS), to wit:

'For one, many are not sure that reform efforts can overcome the formidable domestic political obstacles that will arise as affirmative action policies are tweaked ...this could result in a much more watered-down proposal.

Investors do not want just broad-brushed motherhood statements, but detailed, well laid-out plans that had been thoroughly thought through, and which were unlikely to be reversed as had become commonplace of late.

Most will agree that affirmative action policies in their current form breed inefficiencies and promote rent-seeking behaviour.

This is not to say that some positive changes are not forthcoming, but those expecting a big bang and immediate radical changes may be disappointed.

Amidst the current positive sentiment arising from the cyclical recovery, one needs to be careful to distinguish between short-term out-performance versus a story of meaningful structural change, which will only play out over a longer period of time.'

One expects that since the report is only part one of the NEM final report, what was released yesterday were soundbites to fish for stakeholder feedback.

Now, here's the problem. In the last twenty hours, many versions, variations and vortices of what was meant had come out.

For instance, an intelligent flesh-out is:

'the renewed affirmative action policy, therefore, will be built on four principles:

- it must be market friendly,
- it must be merit based,
- it must be transparent and
- it must be needs based.

walla 31 March 2010 at 14:43  

2

The eight Strategic Reform Initiatives focus on:-

1) Re-energising the private sector to lead growth;

2) Developing a quality workforce and reducing dependency on foreign labour;

3) Creating a competitive domestic economy;

4) Strengthening the public sector;

5) Putting in place transparent and market friendly affirmative action;

6) Building knowledge base infrastructure;

7) Enhancing the sources of growth; and

8) Ensuring sustainability of growth.

The following are some of the highlights of what Najib announced:

* State investor Khazanah to sell 32 per cent stake in Pos Malaysia.

* To list stakes in two Petronas units.

* Facilitate foreign direct and domestic direct investments in emerging industries/sectors.

* Remove distortions in regulation and licensing, including replacement of Approved Permit system with a negative list of imports.

* Reduce direct state participation in the economy.

* Divest GLCs in industries where the private sector is operating effectively.

* Strengthen the competitive environment by introducing fair trade legislation.

* Set up an Equal Opportunity Commission to cover discriminatory and unfair practices.

* Review remaining entry restrictions in products and services sectors.

* Phase out price controls and subsidies that distort markets for goods and services

* Apply government savings to a wider social safety net for the bottom 40 percent of households, prior to subsidy removal.

* Have zero tolerance for corruption.

* Create a transformation fund to assist distressed firms during the refom period.

* Easing entry and exit of firms as well as high skilled workers.

* Simplify bankruptcy laws pertaining to companies and individuals to promote vibrant entrepreneurship. ++

* Improve access to specialised skills.

* Use appropriate pricing, regulatory and strategic policies to manage non-renewable resources sustainably.

* Develop a comprehensive energy policy.

* Develop banking capacity to assess credit approvals for green investment using non-collateral based criteria.

* Liberalise entry of foreign experts specialising in financial analysis of viability of green technology projects.

* Reduce wastage and avoid cost overrun by better controlling expenditure.

* Establish open, efficient and transparent government procurement process.

* Adopt international best practices on fiscal transparency.'

...but can one expect the same in others which may hold wider limelight?

walla 31 March 2010 at 14:44  

4

- As may be expected, while the PM was giving his speech, opposites were being done.

He stressed that english and a knowledge infrastructure would be given some focus. Yet his sidekick on the front row was raising the number of minutes allocated for BM. It's not that one loves our national language less but one should wake up and love our national survival more. Now that ministry has also increased minutes for english. Since hours are fixed, it means the additionals would have to be taken out of other subjects which means less knowledge will be imparted.

There are many who understand why BM is the medium of instruction. It was returned because the rural students are too far behind to use english. But the urban students can and they should not be sacrificed so that the ministry can have an easier job or Umno a bugle to blow the trumpet of fantasy. Accept reality that knowledge today needed for high income is delivered in english and the best knowledge infrastructure is of no use if no one can use it for want of being able to tap the world's knowledge out there. If we cannot save all, save some. And let those who mindlessly follow the clarion calls of bodies like Perkasa and Utusan ask them to later explain why they are still left behind.

Furthermore, there seems to be brewing another shift - from rote to creativity. Well and fine. Have they considered the actual process that goes on in the head of someone who is creating? He must have knowledge first. Otherwise he will be just trying to pull out things done by others, and then try to fit pieces together in an artistic way. More, if he cannot read those things because they are not worded in BM, how can he even do that? So how can he be creative?

Najib also talked about patronage and corruption. Somewhere or other. Would he be calling up Rustam to explain the european trip and would Rustam be able to explain how different it is from the Toyo trip and would Toyo be asked to deliver to Khalid the findings of his disneyland trip so that rakyat money be not wasted?

One of the remits behind the NEM focuses on Sabah and Sarawak, two states the government seem to have neglected for umpteen years until GE12 woke up Umno on their importance as vote cows. If that be the case, why is it that rakyat and doctors are running around in Sabah looking for hospital beds when Shah Alam has a spanking new hospital that cannot be used and located in a valley that has too many blood-sucking hospitals?

Furthermore, how will sweeping the indigenous natives under the term bumiputera alleviate their suffering when it has already been so for years and they are still mired in poverty? Affirmative action for them to compete on open tender for government construction projects? How many indigenous natives run construction companies?

One understand they insist on calling themselves Orang Asli's. If you want affirmative action, let that be affirmed. The fact that it is sideswiped implies the need to hog article 153 above the Other Malaysians. How can this be not addressed upfront before advancing a new economic model that purportedly champions inclusiveness?

And Najib must be transparent with what is underneath the covers of Project M. No rakyat would want the nation's next malaysia plan to focus on those two states and benefit foreigners given immediate citizenship so that they can be supporters of Barisan. And compete with those who were born there. Who had laid down their lives for the nation.

walla 31 March 2010 at 14:44  

3

Since part two, the action plans and details, is slated to be released this June, it means the NEAC unit will have little time to accurately and intelligently filter which feedback from which stakeholder refers to what was released.

The unit cannot just depend on the NGOs, associations and samplings of man on the street because, like postBudget announcements, their responses have seldom been measured or far-sighted, and were more off-the-cuff remarks.

So how is part two, presumably the real beef, going to be carved out in the whirlpool of opinions that is going to be generated?

More importantly, how will the unit decide which is to be considered and which dropped?

Furthermore, there have already been some cogent remarks on what was said. For instance, 'Do you want to base your policies on race, need or merit? Which has more priority? Mixing all them together is too confusing and complicated to implement and is a receipt for abuse. In the end, the status quo remains.'

This clearly indicates that the formulation was still based on trying to balance polarities with view to accommodating party-linked interests, rather than a candid and brutal appraisal of the real situation at the operational level.

I think he needs to address these matters quickly.

- My first impression is that it is a government manifesto addressed to itself. An economic monologue, furthermore made incomplete by the conspicuous absence of capital and fiscal thrusts.

The conclusion is that 'the govt is broke and they have no idea how to dig the economy out of the quicksand, let alone create a new foundation to achieve higher per capita incomes.'

This may be supported by a statement made by one of the NEAC members:

'The country faces a situation where growth has halved compared with before the Asian financial crisis of 1997/1998, private investment has fallen significantly, the bottom 40% made RM1,500 per month on average and four-fifths of the workforce has only SPM qualification. We’re at the crossroads, the way is clear, doing nothing is not an option.'

If this is not considered dire, i don't know what is.

Basically, we're looking at trying to double the per capita income in ten years when the growth rate today is half what it was ten years ago when the ringgit was stronger, and we are trying to achieve that "high-income economy" when eighty percent of the workforce, or sixty percent of the population, has only an SPM or below.

We all know how the standard of the SPM has dropped from year to year, what more the standard of its vocational equivalent the SPVM. We also know how misguided are the educational policies and training resources in place to address the yawning gaps.

Putting it nicely, that's scraping the bottom of the proverbial barrel.

- One of the Mida officials confirmed that inbound investments have petered out and that potential investors walk away because of the equity requirements.

We may add that they also walk away because of local and departmental obstructions and self-interpretations of new policies with the result that pro-business strategies get stymied and blockaded.

Does the NEM address equity requirements, local warlordism and political patronage with sufficient clarity so that potential investors from California to Canute Island can confidently expect the government of this country has given an international Statute of Guarantee that our affirmative actions will really be market-based from now on? Neither speech nor report has addressed this important point, and corporatizing Mida isn't going to help one bit until it is done.

Btw, a bottling plant is just putting sugared water into a glass container. There's no high-income value in it. It's just steady low income.

walla 31 March 2010 at 14:46  

7/7

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 achieve sustainable economic success and everything will be thrown behind that thrust to make it work once and for all which means that de-investing 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'."

What i would like to add here is the missing emphasis. It is all and all about brainpower. Brains are needed for high-income activity because capitalism will pay according to value delivered.

That is not to say the best craftsman with an SPM will not be able to earn as much as the best CEO with a stanford PhD in engineering add-on an MBA from harvard.

But we are not talking about exceptions. The model must pay currency to the point past Umno policies have completely denuded the brain pool of this nation. Because those policies were run by people with little brains, guts and foresight. Only fear, greed and short-sightedness.

Going into the next and perhaps final Malaysia Plan, the NEM must be definitive that their days of glory are over in this nation.

Brains must be championed, double citizenship must be given to those who return, plus the best posts, tax-status and what-not. Especially zero import duty on their automobiles. Especially the new dutch-designed beemer (cough). And their women should get the best treatment. Free spa comes to mind. For a start.

Desperate situations invoke dire measures.

- lastly (are you still with me?) the govt must be careful about how it is going to integrate economic transformation with government transformation, the twin pillars atop the foundation of the two malaysia plans (optimistic, aren't we?)

There's the third pillar of political transformation. Ignore that at your own peril because it can sunder the two and bring the roof down.

Since we tend to see roofs falling these days, that's quite disconcerting.

The govt's focus on subsidy removals and introduction of GST...another day.

walla, at your service.

walla 31 March 2010 at 14:46  

6

If that policy is not dissuaded, they will not come. When the Mida officer mentioned that problem, it immediately conjures to mind the situation before us. If investors can say that outright, it means our incentives no longer interest them. That implies they have a menu of other choices. Which means those other countries will win their investments. Which means in a short while, those other countries will be running fast on the same trajectory that we were on thirty years ago. Which means they will start to build their new infrastructure. Which means ours, already sub-maintained and worned out, will be even less attractive. Which means we are out of the race.

I am sorry if my iq is so low i have to spell out things so laboriously to myself. Just ignore me if you find all this too tedious for your eyes.

Btw, what does corporatising Mida imply? That they will be charging ten ringgit for an investment promotion form and rm500 psf for a trade promotion exhibit space?

The other bit about divesting government holdings from GLCs who will then cooperate in public-private sector projects for government book contracts is a bit puzzling. It sounds like one of those g2g smart partnerships of Langkawi vintage hybridized with affirmative policies of the bumiputra mould because the GLCs are basically bumiputra outfits.

What is odd here is this:

the govt talks about open tenders for govt contracts and then invites private investors to pump minority share capital into the GLCs so that they can win related govt contracts? then how can it be open competition?

- now, i would like to come to the blogger's main point about distributing opportunities to the smaller players.

The govt says open tenders based on merit. This is good practice. But it applies only in economies which are already high income. In our case, the base is wide, the top is narrow. If the tenders are all going to be based on recorded performance, the small players are going to be disqualified because they haven't yet got a record of performance.

It's like a fresh graduate. The employer wants experienced staff. If the graduate is not given a job first, how is he ever going to get experience? And if there are thousands like him, how is the economy in which he is supposed to support, let alone his family he is going to support, ever going to rise to the next level of high income?

However, my take is both. We need global best-of-breed practice as well as capability-building. Which means i agree (cough) with the blogger that the big players should look overseas for their contracts and leave the local field for genuine and capable small players to earn their achievements. This must conditionally mean that the selection of such small players shall have to fulfill the same set of capability criteria as applied to the larger players even as the tender boards diminish the weightage of the capacity criteria.

Now to the notion of CSR, we can add the notion of CER. Corporate economic responsibility can be coined to express affirmative action applied to bumiputra and other malaysian enterprises whereby big players are encouraged to provide some level of management, technical and advisory inputs to small players embarking on local jobs so that these players can close the loop on them to standards and quality more exacting than what have been delivered todate. Needless to say, patronage, corruption and leakage cases will be consigned to oblivion. This is how the big which were once small can help the small of today become the big of tomorrow as well. And so on. You know, like one of those school co-cu organizations-lah.

- allow me to next plagiarize myself; somewhere else i had written this:

"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.

walla 31 March 2010 at 14:46  

5

These are some of the things which rankle above and beyond the glossy covers of new economic models. And they must be addressed because the middle names of Umno in Putrajaya are doublestandards & selfcontradictions. Investors domestic and foreign know it. So too twenty seven million rakyat plus a few million others.

- The flavor of the report is from the same menu of a blueprint, masterplan, malaysia plan, economic review and so on. We have seen how these were couched before and what had come out of them. They did so well we now need a wake-up model. But ZaZa Gabor is not available.

No doubt the NEAC members are men of eminence in their own fields. But where is the guy who has saved a failing business, provided new insights on how to turnaround an economy, kickassed branson-like the notion of national entrepreneurship? This present moribund economy needs their inputs too. We need people who can look around corners and throw up a fresh angle to look at the situation, finesse a breakthrough, open minds wide. A procession of familiar nice statements doesn't a transformation make.

For instance, you have a hundred million to be ploughed into Tasik Kenyir and another hundred million alloted for CSR projects so that Bakti queens can feel good about themselves. Where's the cost-benefit analysis? Why not allot the money for some newfangled solar panels to provide electricity to Orang Asli's?

This government is disconnected left from right arms. Because the head is somewhere else.

- Again, they focus on land. Are they saying that Sg Buluh, Kg Baru and the other federal parcels will be sold by open tender because the government needs money aka Skim Putrajaya or is it a strategic transformational thrust towards a high-income economy?

This freudian focus on hardware without paying fresh attention to the software of such an economy is disturbing if we want to look at long-term structural reforms that underpin real-term operational innovation. It is in essence denialism in disguise fueled by side-income openings for some, not high-income opportunities for all.

- The divestment bits are problematic as well. Take Pos Malaysia. So Khazanah divests Pos. Why only now after it is in debt by half a billion? Why not twenty years ago when the dotcom started and people stopped sending mail because they could just click it instantly? When that technology disruption of bricks and mortars came in, european postal services were already scrambling to reengineer themselves. We are twenty years too late in this one.

And Mida. If the idea of corporatizing Mida is to upgrade their HR function, then the HR function is key to many other similar agencies. Which means the government needs to look at what policies reside in the PSD that constrains putting the best brains to run the critical and strategic organizations in the public sector.

Furthermore, how does corporatising Mida help in its role to promote inbound investments into this country? Another bunch of slides, this time a NEM? Investors are lured when they do not have to share their dividends or have their staff placements persuaded for them.

Anonymous,  31 March 2010 at 16:32  

hmm... so there goes the NEM, wonder why suddenly all sold by GLC's... hehehe.. takdak duit la tu.. for whom all the money? Tanya politicians.. they got the answer.. but of course they'll lie. Mana ada politician cakap betul semua... they all cakap betul sekerat atau tak betul langsung... so it clear, NEM is kambing hitam to corrected all politician wrong.. they ask entrepreneur to corrected their fault by beli share that they offer..wakaka...maybe some hmm but i doubt it will be purchase by outsider, since... hehehe... baru jer mamat Najib tu balik kan..kan. again... wakaka...

...adioss....

donplaypuks® 31 March 2010 at 17:19  

As I predicted, it's old wine in new bottle. Perhaps, instead of using a corkscrew to open it, they'll break the glass at the bottom. I don't know.

A PCI of US$15,000 by 2020 from a base of US$7,000 implies an annual compunded grwoth rate of 8% over the next 10 years. When did we last achieve that? One slip, and it'll be back to the drawing board.

There's no mention what Najib's strategies are to counter flight of manufactring bases to China & Vietnam or to make a dent in, say the financial sector, which S'pore has cornered fuelled by the ringgit's limited trading potential. How are we going to tackle WTO and increasing global competition?

So many questions, so few answers!

What we need is new wine AND new bottle!

dpp
We are all of 1 race, the Human Race

Anonymous,  31 March 2010 at 18:46  

Bravo Walla,

Somehow your words as well putting theory at its is makes one ponders

Nonetheless, I summed up it is truly indeed the country has lost its direction.

High-Income needs Super-Spectacular
Brains!

I'm curious too, all this while what MIDA have been doing?

Upon, checking MIDA online of "how to do business in Malaysia"

It is pretty much a non brainer - for a while I feel like i'm reading some cheap-pamphlet.

Terima Kasih Daun Keladi

I think Mr. PM smokes too much pot

-Ikan Tongkol-

Anonymous,  31 March 2010 at 21:42  

Nice big names in the NEAC..wonder if any of them have technology/scientific/engineering backgrounds.

Doubt so cos the technical guys are too myopic and detailed.And they tend to be a bit more grounded..don't hv the imagination nor able to spew those impressive buzz words.

Sell down GLCs..get some money in govt coffers>>later if they don't perform the investors will get all the analyst to have hard biting write ups about govt's failures to observe the rules such as market driven tariff hikes.toll rates adjustments.support for new capex etc...and with threats that the "foreign investors" hates uncertainties..thus will look for safer havens.Govt will bend to their pressure as they always hv done after TDM's era.

Problem is >>the GLCs are monopolies so poor consumers hv zero choice.And govt will come up with subsidies and the works to keep the voters sweet.

Same old..same old.

kuldeep 31 March 2010 at 22:11  

Dato..

Can you please help us to understand..

PM says he spent 67 bil om pump priming and he thinks that the full impact is on fourth quarter 2009...

But RM 67 bil without any multiplier is already 10 % of GDP...with the multiplier effect of 2 to 3 times that PM mentioned (focus on high impact projects etc)we should be looking at 20 to 30 % growth..

Will be good if we can see the actual numbers >>I hv strong suspicion that a lot of the funds are guarantees on recycled loans..stock market support operations etc..

Will be nice to see NUMBERS b4 we get trapped in NEM mathematics.

walla 1 April 2010 at 07:38  

and some final thots on the NEM....

http://is.gd/b8VSG

hishamh 1 April 2010 at 09:32  

walla,

You really ought to have your own blog. Your pearls of wisdom are all over the place and sometimes we miss some. You'll have a ready audience, I promise.

donplaypuks,

"A PCI of US$15,000 by 2020 from a base of US$7,000 implies an annual compunded grwoth rate of 8% over the next 10 years. When did we last achieve that? One slip, and it'll be back to the drawing board."

We last achieved that over the last ten years, believe it or not.

The target is in nominal US dollars, not constant dollar. In real terms, the NEM is looking at 6.1% for the first five years and 6.9% for 2016-2020, but they're assuming lower than normal inflation over the next decade. If we take the long term Malaysian average instead, we only need around 5.5%-6.0% real GDP growth, or about the same growth rate as achieved this past decade.

kuldeep,

The approximate breakdown of the stimulus packages are:

1. RM5b savings bond (not spending at all)

2. About RM27 billion in loan guarantees

3. About RM35 billion in actual spending

I seriously doubt fiscal multipliers are as high as you quote, though I can't be conclusive about that. There isn't any accessible research on Malaysian fiscal multipliers that I've been able to find. The general research out there tends to show multiplier estimates between 0 to 2, depending on your priors.

In theory, because we are a small open economy, the multiplier ought to be less than one due to leakage into imports, and an independent central bank reduces the multiplier further. I'd tend to discount the latter factor in our present circumstances, because of the lack of evidence of crowding out, but the former factor likely has an impact.

Anonymous,  1 April 2010 at 10:10  

As for me I don't want anything from Najib.
I just want him to open up his big mouth.
Saya mau tengok itu lidah dalam, lidah manusia atau lidah biawak.
That's all Dato.

hishamh 1 April 2010 at 10:14  

kuldeep,

Sorry, I just realised I haven't answered your question. To see why the stimulus packages didn't result in double digit GDP growth, you have to allow for the following factors:

1. Actual direct spending was about only half the full Ringgit value of the packages, and constituted less than a 10% increase in the total planned govt outlay for 2009;

2. Time lag in implementation means that the effects have to be spread out - the consensus seems to be that the effects will last from about 3Q 2009 to about midyear this year, with max impact in 4Q 2009 and 1Q 2010;

3. The additional spending did not even begin to cover the deep, deep drop in external trade receipts in 2009 (over RM110 bilion), and the even steeper drop in industrial production;

Essentially, the extra government spending (largely investment) was swallowed up by an even bigger drop in private investment.

walla 1 April 2010 at 10:51  

hishamh,

you're right abt the multipliers:

http://is.gd/b96Jb

kuldeep 1 April 2010 at 11:04  

Thanks Mr Hishamh...u actually answered my question and more.

But talking as a layman and bringing it to my micro level..
When one is retrenched and can't get a decent job in the immediate horizon ;one hv the options of

>>BAU by spending off ur savings and praying that something will turn up sooner rather then later,
>>sell off wateva is unnecessary..move to smaller house,use smaller car,cut off the dinners at lafite..conserve capital and look for ground floor investment opportunities leveraging wateva ur good at

So,u reckon which route is PM taking or took?Wat did we use the RM 35 bil for?
In the Pak Lah buzzspeak was it for building capacity ?

hishamh 1 April 2010 at 11:26  

walla,

Thank you! I've been thinking of doing my PhD on this topic, but couldn't find any relevant papers on Malaysia to get started on. This is a nice one, though he is using an old-school structural model (which tends to find higher multiplier estimates) rather than a more modern DSGE or SVAR model.

kuldeep,

Under standard Keynesian theory, it doesn't matter where the spending is, as long as it is spent. The whole idea is to support the economy during a downturn, and rebuild private sector confidence. Obviously, from a practical perspective, spending on investment is better over the long term than consumption.

Anonymous,  1 April 2010 at 13:49  

Walla,

"The telling thing in the speech was the invitation to Malaysians who have left the country to come back."

Guess what ? The waiting time to give up Malaysian citizenship is currently running at almost 6 months at one of our embassies. Give up not apply for citizenship.

It is way too late to appeal to their loyalties. Add to the likes of Ibrahim Ali telling them they are not welcome back and now the DPM has endorsed Perkasa as well, DSN might as well say goodbye to them and wish them luck in their new country.

Pray tell what is there to attract them back ? The mouth says one thing but the hands does the opposite. There is no credibility. Even if he were to dangle carrots, many of us do not feel safe with the high crime rate in the country.
So DSN thanks but no thanks but we can definitely thank Ibrahim Ali to help us make up our minds.

kuldeep 1 April 2010 at 23:04  

we are good at building hardware at inflated prices>>
it must begin with spaceplanning..define the useable floor areas,then minimise circulation,lobbies etc..
i believe we hv lost the art of optimising space..just designing for more then is really needed.
Next.the Engineering hv to ensure that the structural design is optimised..and with view towards simplification.

Wat is needed is NEW BENCHMARKS for GFA/Structural Designs etc

Believe me..a beautiful n intricate school does not produce the best students.Its better to spend on software i.e teachers,teaching aids as such

The low labour cost masked the design inefficiencies.Govt shld look at some of the bldg cost of private univ/colleges/hospitals etc..
You got lots of talent within the govt ranks but they're never challenged to do the right things.

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