28. Now le’s us scrutinize the basic features of NEM.
29. Firstly, NEW Economic Model seems to be a misnomer because it is NOT new. It is a copy cat as admitted by Dr Danny Quah (This isn’t an exam: why not copy good ideas however and wherever you find them?)
Malaysia’s new economic model: Making choices. I was told that he is one of the NEAC member and notoriously known as a staunch anti NEP bigot.
30. The model had been introduced in Chile, Argentina and Bolivia. Under the guidance (or misguidance) of the notorious Milton Friedman & the Chicago Boys, it provided the same prescription for these three Latin American countries – privatization, liberalisation, remove protection / free competition, eliminated price controls, withdraw subsidies and cut government spending / less government role.
31. The end results were socio-economic disasters – high inflation, massive unemployment, drop in wages, increase in poverty and evaporation of national assets. The locals never tasted the profits of free market but, instead, had to bear the cost of a welfare economy. Then who benefitted the most? The foreigners!
32. Secondly, this same model is transplanted in Malaysia with the same prescription – privatization, liberalisation, remove protection / free competition, eliminating price controls, withdrawing subsidies and cut government spending / less government role. Hence, if we are not careful, we could expect the same socio-economic disasters as suffered by Chile (1973), Argentina (1976) and Bolivia (1985).
33. Who would be the major beneficiaries? The rich and powerful locals and foreigners!
34. Those frightening ‘and scary as hell’ results were well documented in the books I mentioned earlier.
35. Based on the said prescription, therefore, one can safely conclude that NEM (together with its NKEAs) is systematically pre-planned to strengthen the rich and destroy the weak and poor; it means destroying the Bumis because majority of the weak and poor are Bumis. Hence, there is no reason for me to change my earlier view that NEM is indeed a new tool to colonise the Bumis.
36. Thirdly and paradoxically, the NEM also strongly emphasised on so-called market-led economy / market friendly. It is a paradox because it romantically embraced ‘the market’ at a time when even the greatest free marketeer (USA) is turning to the other direction or is distancing itself by introducing more regulations, becoming more protectionist and the government is playing a more active role in managing the economy.
37. Germany was registering a respectable economic performance under the current hostile environment by having high technologies, high wages and more REGULATIONS; it unambiguously means lesser ‘market’ roles!
38. Is Idris Jala aware of this emerging landscape? Anyway, does anyone, including Idris Jala, really know what ‘the market’ is?
39. It is high time that NEAC defines what or who is this ‘market’ animal? To the best of my knowledge, it’s faceless, has no ideology, has no loyalty and has little clue about itself (themselves). That is why, according to Dani Rodrik, steering the economy by the dictates of market confidence is a fool’s errand.
40. Policy makers, including Idris Jala, need to articulate coherent, consistent and credible accounts of what they are doing are indeed based on both good economics and good politics. They have to say: “we are doing this not because the markets demand it, but because it is good for us and here is why.”
41. That was what Tun Dr M exactly did during the 1997 Asian Financial Crisis. He did not listen to IMF, World Bank or George Soros if they were indeed ‘the markets’.
42. If still not fully convinced, Idris must learn from China’s economic policy. According to one China’s high ranking officer, “in China we make the market economy to serve the people and the State, not the market”!
43. Accordingly, DSN should immediately realise that if the present crisis gets worse, it will be HIM and other political leaders that bear primary responsibility – not because he / they ignored the markets, but because he / they took them too seriously, again as cautioned by Dani Rodrik.
44. One should also pay attention to the findings of Stephen Haggard and Naomi Klien. According to the former, market-oriented policies were not implemented well in democracies. The latter pointed it out that not a single multi-party democracy fully embraced free market policies. Logically, therefore, if they had failed in a racially homogeneous country, who then can guarantee that pro-market NEM will succeed in a multi-party and multi-racial democracy like Malaysia?
Comments on outputs
45. Now let me briefly comment some of those publicised outputs. More comments can be found in many places such as here.
46. Equal opportunities / free competition – the ideals of equal opportunities, free competition and meritocracy should be supported in a globalised world. However, to be fair to all parties, these ideals must be pursued only in an ideal environment – a level playing field. Unfortunately, as recognized by many, if not all, our playing is yet to be levelled.
47. Hence if these ideals are pursued vigorously and brutally, not mindful of the glaring socio-economic imbalances, it means Idris Jala is promoting the law of the jungle and the government endorsed it. Equal opportunities in unequal environment will breed greater inequality; ipso facto, the collapse of inclusiveness and the NEM!
48. Simultaneously, unintentionally and unfortunately, we would be courting British Disease.
49. Please remember, even TS Yeoh, DS Fernandes and TS Vincent Tan and many others did beg for government’s assistance, protection and incentives. So it is highly appreciated that if these so-called successful businessmen can immediately stop from being hypocrites as well as be truthful and honest to themselves! Please realise that not all the rakyat are naive.
50. Less government role / Privatization / GLCs sell-off – Firstly, who will be the potential buyers / beneficiaries? The richest and most powerful. Who are they? The foreigners and non-Bumis. History of Tongkah Holdings, Pantai Holdings, Chile, Argentina and Bolivia will be repeating. National treasures, including government lands, will evaporate!
51. Secondly, how does the government ensure that privatization does not produce negative impact on public interest and welfare of the rakyat? Please refer to government’s commitment written on stone on page 94 of 10th MP.
52. Thirdly, how does the NEM / government reconcile with the objective of narrowing the income gap (Gini Coefficient), from 0.441 (2009) to 0.420 by 2020 as written on stone on page 153 of 10th MP? Since the country’s treasures will be exclusively expropriated by the rich while the poor may only benefit from purported increase in wages, the obvious resultant impact will unambiguously be widening income gap as happened in the three Latin American countries.
53. Inequality is also widening in Singapore, USA, etc!
54. 6% annual growth rate and tripling of the GNI – it is expected that the opposition politicians would be laughing at these forecasts and the government politicians would normally laud them. What is required for the purpose of ‘buy-in’, Idris Jala must provide the detailed assumptions and calculations, including the input-output ratios, multiplier effects, etc that were factored in into these forecasts. Until then one has to gentlemanly reserve further comments.
55. Doubling of GNI per capita from RM23,700 per year ( or RM1,975 per month) in 2009 to RM48,000 per year (or RM4,000 per month) by 2020 – this effort must be supported. However, notwithstanding what is mentioned in the previous paragraph, the rakyat must be appropriately informed about the true meaning of GNI per capita. Please do not exploit their ignorance.
56. GNI per capita is the total amount of annual goods and services in value added terms produced by companies, NGOs, households, etc and divided by the total population. It has nothing to do with personal income but, unfortunately, please be aware that the majority thought that it is as if their personal income.
57. When GNI per capita increased, they thought their personal income will also automatically increase. So naturally, and ignorantly, many are happy. Unfortunately, there is no direct correlation or one-to-one relationship between GNI per capita and personal or household income. Hence, some are sceptical and cynical.
58. They are sceptical and cynical because their personal income is very much below the 2009 monthly GNI per capita income level of RM1,975. The average monthly household income then was only RM4,025 or roughly RM1,006 on per capita basis, that is, only half of the former. Hence they wonder how their monthly household income could quadruple to RM16,000 or RM4,000 a month on per capita basis by 2020! That explains the scepticism and cynicism.
59. Identified 131 EPPs and 60 business opportunities – according to the briefings, these projects / opportunities will spearhead the much needed growth (73% of targeted GNI of US$523 billion by 2020). IF the assumptions are reasonable, IF the calculations are correct, IF the announcements are true and IF there is no hanky panky, the programmes will generate the anticipated growth. However, doubts have already been raised, for example, in the case of constructing MRT in Klang Valley and the critical issue of supply and demand of floor spaces.
60. Additionally, these programmes are largely urban- and rich-biased. Only 25 projects or 19% are rural-based. Hence, from socio-economic engineering point of view, they are not specifically targeted to seriously help the rural / the poor. As such, the worry about C. Elliot’s Confidence Mechanism paradigm is valid. If indeed the reasonable worry does materialise, the rich will become richer and the poor will become poorer!
61. Total investments were valued at US$444 billion; 92% from the private sector and only 8% from the government – firstly, admittedly, Idris Jala was not bluffing but he was not telling the whole truth either. He failed to inform us during the briefing that, out of that 92%, 32% will be borne by the GLCs. It means, invariably, total government’s fund would be 40% (8% + 32%), excluding potential guarantees. The private sector’s fund would be much lesser – only 60%!
62. Secondly, Idris must convince the rakyat that he can almost triple the private investment to the tune of US410 billion (RM1.27 trillion) by 2020 against a background of RM535 billion private investment during the last 10 years and the current hostile global environment.
63. Thirdly, if it is true that government investment would only be 8%, it means during the 10 year period, only US$35.5 billion of government / rakyat’s money / asset will be used for investment. My immediate question is, are the government lands identified for development / redevelopment in Sg Besi, Chochrane, Sg. Buluh, Bangsar, MATRADE, etc that dirt cheap? In the name of transparency, Idris Jala must declare the total land areas involved and the calculated / estimated value of per sq foot of these parcels of precious land. Unsangkarable!
64. 3.3 million jobs will be created by 2020 – the rakyat should be happy to hear this piece of optimistic forecast. It not only means a guarantee of full employment but, at the same time, demand (3.3 million jobs) will exceed supply (increase in working age population = 2.7 million) during the same period and 60% of those jobs are in high paying bracket.
65. Since 75% of Malaysian workforces are wage earners therefore the most logical step to increase income is to create high income jobs where the Rakyat will benefit from a competitive economy and, hence, will enjoy a better way of life. This is the raison d’etre of the NEM.
66. Higher wages can be induced through (a) maximising capital (b) greater productivity through the use of skills and innovation, improved coordination, stronger branding and compliance with international standards and Intellectual Property Rights (c) investment in new technology, multi skills, innovation and creativity, and (d) increased competency. These are the drivers of public and private sector performance.
67. However, there are a few nagging questions need to be promptly addressed. Firstly, will the private sector stop from being hypocrites and has the will to pay high wages immediately?
68. Secondly, will there be a perfect match between supply and demand? If not, how fast the locals can be trained and benefitted from these NKEAs. If it is not that easy and not that fast, the imported foreign talent will get the lion share and the poor households at the bottom 40% will be at a gross disadvantage – getting the low paid jobs. Mindful of what was mentioned earlier (paras 47, 52 & 60), the income inequality will be exacerbated.
69. Thirdly, only 320,000 jobs or 9.7% will be created in the rural areas; hence further strengthening the perception of the government’s continued urban-biased approach.
70. I wish to repeat that if NEM /NKEAs are retained in their 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 / programmes which will subjugate the poor who are largely Malays / Bumis. The highly probable outcome is analogous to the result of a surgical operation: the operation (NEM / NKEAs) succeeded but the patient (Malays / Bumis) died! QED.