THE NEW ECONOMIC MODEL – WHY MPM CONDITIONALLY ACCEPTS?

1. As one of the panellists of Kongres Ekonomi Bumiputera organized by Majlis Perundingan Melayu (MPM) on 29 May 2010, I wish to share my thoughts with those who did not have the benefit of participating in the deliberation, especially with those who do not share our wisdom and vision. In particular, I wish to share some salient points on why, unanimously, we conditionally accepted, or alternatively rejected in principle, the New Economic Model (NEM). The exact wording is as follows (page 7):

“Kongress…telah bermuafakat untuk menzahirkan pendirian bahawa penerimaan MBE ini oleh Kongres tertakluk kepada kesediaan kerajaan untuk;”

We are willing to buy-in the proposed Model if the government is willing to consider and incorporate our 31-point resolution adopted by the 126 MPM affiliates. Hence, outright rejection of NEM is a non-issue.

Preambles

2. Before I proceeded further, it is useful to restate my preambles. They will provide some useful pointers and parameters.

3. First, NEM is an NEAC document circulated to solicit feedback; it is YET to be finalised and accepted by the government. Since we are in the engagement mode, therefore, it is more productive to channel our ideas, aspirations, concerns and misgivings to the NEAC rather than resort to attacking and name-calling each other.

4. Being an integral part of the civil society, holding the Kongres is a clear manifestation of MPM’s positive, pragmatic and matured response as a responsible body.

5. Second, we appreciate and recognize that all rakyat of Malaysia have a stake in this NEM and, therefore, they have an unalienable right to voice their concerns, register their future needs and submit their recommendations to NEAC. Accordingly, no one has the right to question or belittle the MPM on this engagement since we do not question or stop anyone / any group like Dong Jiao Zong, Hindraf, Suiqui, FMM and FOMCA from doing the same.

6. MPM never expected to be attacked by its own race. Its core business is to unite the Malays because MPM has long realised that our people have been fighting with each other far too long until we are decomposed and weak. In actual fact, we are digging our own graves. The non-Malays are laughing at us. Don’t blame them if they are urinating at us; blame ourselves.

7. We should learn from the Chinese. They are united when facing a common enemy, in advancing a common Chinese interest or when a common Chinese interest is under attacked. Issues on ‘immigrant race’ and Chinese education are classical examples. Logically, therefore we should be united in engaging the NEM for a common goal / vision – betterment of the Malays (it can be further refined). Differences in ideas, strategies and approaches should be discussed and harmoniously iron out.

8. Third, we were willing to participate in this engagement because we were encouraged by our PM’s willingness to listen and to respond. He is not like Obama, conducting a one-way traffic like a diode; only listened but did not respond. Najib is even much better than Sarkozy and Brown!

9. Fourth, NEM was touted as something new and we would like to embrace new things IF they are better for us since we also believe that “doing the same thing over and over again, expecting different result is lunatic”.

10. Fifth, since we are yet out of the woods (great economic crisis / recession), we do share the two Chinese characters embodied in the word ‘Crisis’ – danger and opportunity. Therefore, we view NEM as an opportunity to improve the Malays’ well-being, as encouraged by the DPM (Malays must see the NEM as an opportunity and not a threat) but, at the same time, mindful of its possible threat in destroying the Malays, if any.

11. Sixth, we agreed with Najib that this is the right time to change. And since we also shared Paul Otellini’s view that “It’s a lot easier to change when YOU can than when YOU have to. The cost is less. You have more time” therefore we do not belong to the so-called group who wants “to do business as usual”. Combined with the fourth point, it is therefore dead wrong for anyone to think that we are having that kind of mindset. If they still wish to be obsessed with that ancient thought, then they are still behind the curve and trapped in that stereo-typed primitive mentality.

12. Seventh, we fully supported the NEM’s target of increasing the country’s income as measured by the GNI per capita, from US$7,250 (2008) to US$15,000 by 2020 as it is consistent with the Islamic principle of Zakat. We must share wealth (enlarging economic cake), not poverty (shrinking economic cake)!

13. Lastly but most importantly, MPM participated in this engagement because we fully subscribe to Najib’s commitment that NEM must be NEP-compliant. He had unambiguously expressed that “THE NEP OBJECTIVES ARE RELEVANT…WE WILL CHASE THE SAME GOALS, BUT TRANSFORM THE WAY WE DO THINGS”. So no one should conveniently over look this critical statement by our PM.

Why reject?

14. In principle, MPM unanimously rejected NEM because of its severe weaknesses and flaws. It is accepted if they are rectified.

15. First, it insubordinates PM’s directive of ensuring NEM as NEP-compliant. As rightly pointed out by Datuk Halipah, another panellist, Bumiputera economic agenda was not conspicuously outlined in NEM, albeit the word ‘Bumiputera’ was only mentioned twice in the Executive Summary! Prof. Dato’ Normah, the speaker representing the NEAC and Secretary of the Council, belatedly admitted this naked fact. In actual fact, this single reason is justified to reject totally NEM. Nonetheless, PM tried to save the NEM when he singularly assured the MPM audience that Saturday night that the New Model will explicitly incorporate the Malay Agenda.

16. Does anyone still have digestion problem with Normah’s said admission and PM’s said directive?

17. Second, in trying to project and sell NEM and current administration, the entire tone of the document was hostile towards NEP and past administration inclusive. Using unfriendly (caustic?) language, NEM unfairly criticized and condemned NEP as well as putting all the blames on the said policy for all the alleged government weaknesses and failures. This excerpt, as an example, attributed to the NEAC Chairman, may enlighten us about this soulless Malay:

“IN ONE PRIVATE ENGAGEMENT BETWEEN TAN SRI AMIRSHAM AZIZ – THE SO-CALLED MALAY CHAIRMAN OF THE NEAC BUT ALLOWED MINORITY AND FOREIGNERS TO OVERWHELM THE NEAC MEMBERSHIP, HE SAID THAT NEW ECONOMIC POLICY (NEP) WAS THE REASON THAT MALAYSIA LOST ITS COMPETITIVENESS.
AMIRSHAM WAS NOT THINKING INDEPENDENTLY AND ANALYTICAL IN HIS CHAIRMANSHIP OF NEAC FOR HIS IS REGURGITATING THE VIEWS OF OTHERS. USING THAT STAND ON NEP, NEAC PROPOSED THE NEW ECONOMIC MODEL TO THE GOVERNMENT.” – ANOTHERBRICKONTHEWALL.

[Tan Sri, one small question. Our ranking in the IMD Competitiveness Index has leaped from no. 18 to no. 10. Is it due to your NEM?]

18. As such, one cannot help but to have this naughty feeling that the actual intention of the drafters, by way of extension, was to attack and to belittle renowned and highly respectable Malay leaders like Tun Razak (the architect of NEP) and Tun Dr Mahathir (the engineer of NEP).

19. Allow me to pick up a few examples to demonstrate my point.

20. Firstly, it accused NEP “has engendered pervasive corruption”. I don’t condone corruption and do admit that corruption in Malaysia was higher than in certain countries. However what I don’t agree with is its unbalanced statement. Which country that has zero corruption and zero patronage?

21. I wish to point it out that some of those countries that the drafters were proud of, in actual fact, were worse than Malaysia, including the darling BRIC countries. Corruption Perception Index of 180 countries provided the relevant evidence:

CORRUPTION PERCEPTION INDEX (CPI) [180 COUNTRIES] – Malaysia is better than these countries:

• MALAYSIA – 56 (4.5)
• BRAZIL – 75 (3.7)
• CHINA – 79 (3.6)
• INDIA – 84 (3.4)
• INDONESIA – 111 (2.8)
• RUSSIA – 146 (2.2)
• THAILAND – 84 (3.4)
• VIETNAM – 130 (2.5)

22. Secondly, NEAC did not fairly acknowledge the achievements of previous leaders in building the country’s economy, despite its multifarious challenges. It accused the past leaders of failure to get the country out of the income trap; implying the economic growth had plateaued for many years. However this graph shows that our GDP per capita was continuously on an uptrend, not flattening. Doesn’t it mean NEAC has a bad intention (mala fide) in condemning the government by hiding behind a new terminology “middle income trap”?

Carta 1: GDP Per Kapita Malaysia,
1970 – 2009 – TERUS MENINGKAT, TIDAK TERPERANGKAP

23. Thirdly, it accused “our economic growth has come at a considerable environmental cost…” We do not know what evidence the NEAC used. However, based on CO2 emission per capita and endangered species, Malaysia has a much better record than many developed countries:

CO2 EMISSION PER CAPITA (TONNE):

– MALAYSIA = 7.7
– LUXEMBURG = 22.4
– OECD (AV.) = 9.5

ENDANGERED SPECIES:

– MALAYSIA = 631
– ITALI = 2
– OECD (AV) = 166

24. Worst still, it condemns that the growth “has not benefitted all segments of the population”. What a blatant statement! There could be pockets of the population who are yet to get the trickling effects of development but which country that does not have the same problem?

25. The following information shows that average monthly household income of all races and strata (urban / rural) had increased many folds over the years; concomitantly, poverty had significantly declined. Who benefitted from this continual economic growth and distributive policy?

Carta 2: Pendapatan Purata Bulanan Isi Rumah,
Malaysia, 1970 – 2008 – TERUS MENINGKAT

Carta 3 : % Kemiskinan Isi Rumah,
Malaysia, 1970 – 2008 – HAMPIR SIFAR

26. Additionally aren’t the Malaysian populace benefitted from the relatively long period of low inflation and full employment regimes?

Carta 4 : Kadar Inflasi, Malaysia
1970 – 2009 – PURATA RENDAH

Carta 5: Kadar Pengangguran Malaysia, 1982 – 2009 – PURATA RENDAH

27. Fourthly, it crudely accused “the gap between the rich and the poor is widening”. Inequality has 2 aspects – (a) within races / strata (intra) and (b) between races (inter). Regarding the former, it can be measured by using the Gini Coefficient – ‘0’ is perfect equality and ‘1’ is perfect inequality. Over the years, the data indicated that income gap within races and strata had indeed narrowed. For example, in 1970, the overall inequality was 0.443. However in 2008, it had reduced to 0.439.

Carta 6: Jurang Pendapatan Isi Rumah Intra Kaum &
Bandar / Luar Bandar (Gini Coefficient),
Malaysia, 1970 – 2009 – SEMAKIN RAPAT

28. Regarding the latter, it can be gauged by using income ratios. Again, it is very glaring that the government has succeeded in bridging the inequality gap between races / strata. As an example, in 1990, for every RM1 each Malay household had, the Chinese household had RM1.74 (1:1.74). In 2008, the ratio has improved to 1:1.41.

Carta 7: Jurang Pendapatan Antara Kaum & Strata
(Nisbah Pendapatan), Malaysia, 1970 – 2008
– SEMAKIN RAPAT

29. There are a few more unfair attacks by the NEAC. However I wish to make one last comment on its claim of mediocre economic growth rate. The Chart below, on the contrary, proved that our past leaders had generated respectable growth rates. In fact during the 20-year NEP period, the average growth rate was almost 7% per year. It proved that the Policy did not inhibit growth. More importantly, it simultaneously spread distributive justice as exhibited by increasing average monthly household income, decreasing poverty, narrowing income gap, low inflation and full employment.

Carta 8: % Pertumbuhan GDP Per Capita,
Malaysia 1970 – 2009 – PURATA TINGGI

30. Can the NEAC and its supporters show to us which country had achieved such an excellent output mix during a given period? Based on these extraordinary achievements, I wish to repeat that Tun Razak and Tun Dr Mahathir more deserve to be given the Nobel Prize on Empirical Economic Management as compared to those academicians and technocrats who may not be able to run even a small company profitably. Some did try the easiest way to show profit by quietly selling the company’s asset.

31. The resultant conclusion is that one cannot but agree with us that it is WE who are genuinely supporting and defending the government while NEAC and those who embraced NEM blindly are in fact brutally condemning and attacking the government. Implicitly, it looks as if they want the BN government to stand down and be accountable for those purported wrong doings, weaknesses and failures. Hence, NEM becomes a weapon that kills the master (Malay proverb – senjata makan tuan).

32. Accordingly, will PM and his cabinet agree with MPM or throw their supports to the NEAC / NEM?

33. Now led us concentrate on the third reason why we vehemently rejected NEM. It is because it took away our unalienable rights as enshrined under Article 153 of the Federal Constitution in the dubious names of economic efficiency, meritocracy, free competition, market-led, market-friendly, etc. We DON’T disagree with those jargons but not at the expanse of our rights.

34. Admittedly, it does mention, albeit, superficially about the special position of bumiputera (please note its usage of small ‘b’; shall we spell the word ‘chinese’ and ‘indian’ using small ‘c’ and small ‘i’ respectively?) and does try, albeit, only implicitly to help them by designing market-friendly affirmative action programmes for those in the bottom 40% of the households – 77.2% are bumiputera (again please note the small ‘b’).

35. First, the NEAC must be told in no uncertain terms that it has no power to take away anyone’s right as enshrined in the Constitution. If no one can take away unconstitutionally the citizenship of non-malays (rich and poor), the same goes for Article 153 (quotas on scholarships, permits, licences, etc for the Malays, Orang Asli and Bumiputeras of Sabah and Sarawak) and other related Articles. If non-malays are not willing to surrender their citizenship rights and rightly do not expect others to trample on that rights, so also the Bumis (rich and poor) pertaining to their rights as stipulated under the said Articles. Therefore the Bumiputera Economic Agenda, consistent with those Articles, must be clearly outlined in detail in the NEM.

36. Second, the Bumi’s rights are not meant for the bottom 40% of the households only; the top 20% and middle 40% have the same constitutional rights. However, as a departure from previous practices, meritocracy and free competition should be practised among the Bumis within EACH stratum. By implementing this paradigm, the Bumis, across the social stratification, will get a fair share of the nation’s wealth based on economic efficiency; not through rent-seeking, patronage, etc.

37. If NEM’s approach is adopted (affirmative action only for the bottom 40% of the households), the paradigm of confidence mechanism as postulated by C. Elliot will be set in motion. The big fish in the smaller bowl at the top layer will expropriate most of the nutrients; leaving some to filter down into the bigger bowl at the middle layer and very little left to trickle down into the largest bowl at the bottom layer.

38. In one sentence, one may describe the paradigm as elastic to the extent of giving ‘cosmetic concessions’ to the poor (Malays). Proverbially speaking, the rich (non-Malays) get the meat; the poor (mostly Malays) only get the gravy. Hence, not only the bottom 40% will largely remain poor but the inequality will further widen as in the case of Singapore and the USA. We must avoid this socio-economic landscape.

39. Allow me to drive home the point by demonstrating a probable case. NEM, for example, has proposed precious plots of government land in Kuala Lumpur to be sold on an open tender basis. Who will be the successful bidder? One who quoted the highest price! Who? The richest man among the rich. Who? The Chinese!

40. The same goes with the proposed sale of GLCs, procuring big contracts, accruing long term concessions, etc. These are the nation’s wealth which NEAC is strategically and systematically scheming to be expropriated by the rich. And the rich is largely from one race. If this worry does become a scary reality, isn’t it fair to conclude that NEM will become a deadly tool to colonise the Malays until kiamat (end of the world)?

41. In the meantime, what happen to the middle and bottom 40%? Their standard of living could have improved through increase in wages as a result of capacity building, empowerment, etc. However this increment is hugely small relative to the wealth expropriated by the top 20%. Hence, the resultant widening gap between the Bumis and non-Bumis. Because of this highly probable socio-economic landscape that we proposed Article 153 be implemented across social stratification since the playing field between Bumis and non-Bumis is not level even at the top 20% . Appling meritocracy and free completion under this hostile environment is in actual fact revisiting the law of the jungle – survival of the fittest.

42. Now lets us go to the fourth reason why we have to reject NEM in principle. It is rejected because it does not guarantee outcomes. As declared by Datuk Dr Mahani, a member of the NEAC “THE EMPHASIS SHOULD BE ON OPPORTUNITIES AND PROCESSES BECAUSE IT IS DIFFICULT TO GUARANTEE OUTCOMES”.

43. Hence, it is beyond reasonable doubt that, from the outset, NEAC had in fact conceded defeat and, therefore, who is going to naively believe in the final delivery of its promises which could be construed as rhetoric:

• FAIR DISTRIBUTION?

• RAISING THE INCOME LEVEL OF BUMIS?

• INCOME PARITY WITH OTHER ECONOMIC GROUPS?

• NARROWING INCOME INEQUALITY?

• EQUITABLE SHARE OF THE NATION’S WEALTH?

• MONITORING PROGRESS?

44. At the same time, it seems as if NEAC is arrogantly not paying attention to DPM’s exhortation that “MALAYS MUST BE LESS OBSESSED WITH PROCESSES AND PROCEDURES COMPARED WITH OUTPUT”. Will then NEAC focus more on outputs and bravely guarantee the outcomes after this?

45. There are a few more weaknesses inherent in the NEAC, including its theoretical framework. Those who are interested to know more may visit my blog here.

Conclusion

46. If NEM is retained in its present spirit, form and substance, one cannot escape from concluding that it is camouflaged behind a smokescreen of excessive sophistication and esoteric concepts with the attendant policies which will subjugate the Malays. The highly probable outcome is analogous to the result of a surgical operation: the operation (NEM) succeeded but the patient (Malays) died! QED.

• Senator Datuk Akbar Ali was formerly Deputy Chief Statistician, Statistics Department Malaysia and Executive Director, MTEN Melaka.