ETP to keep Malaysia on the right track to high-income status by 2020
By Cecelia Kok, The Star
BEING a small and open economy, Malaysia may not be totally insulated from the effects of a global economic slowdown expected in the year ahead. But the last thing we have to do, says Datuk Seri Idris Jala , is to bury our heads in the sand.
Quoting his favourite quote by American author Helen Keller, Jala says: “If we keep our faces to the sunshine, we will not see the shadows.”
The Minister in the Prime Minister’s Department who also acts as the chief executive officer of the Performance Management and Delivery Unit (Pemandu) is confident Malaysia has sufficient measures in place to not only cushion its economy against potential turbulence, but to also maintain it on the right path to become a high-income and developed nation by 2020.
“As long as we remain focused on our key growth areas and keep on promoting a competitive environment through our strategic reform initiatives, we will not be derailed,” Jala says.
Indeed, focus on the 12 National Key Economic Areas (NKEAs) and ensuring competitiveness through Strategic Reform Initiatives (SRIs) have become the two keys driving Malaysia’s Economic Transformation Programme (ETP) that aims to propel the nation to high-income status by 2020.
The ETP was launched a year ago by Prime Minister Datuk Seri Najib Tun Razak . It contains a set of reform and growth measures to boost Malaysia’s gross national income (GNI ) to US$523bil (RM1.7 trillion), or GNI per capita of US$15,000 (RM48,000), by the end of this decade, so as to meet the World Bank ‘s threshold for high-income nation.
And in line with the GNI target, the ETP is expected to draw in US$444bil (RM1.4 trillion) worth of investments and create 3.3 million additional jobs by 2020.
The ideal situation for this to happen smoothly is to grow the economy, or gross domestic product (GDP), at an annual rate of 6% for the next 10 years. But the ongoing global economic uncertainties stemming from unresolved problems in Western developed nations might just be a damper to the plan. While Jala concedes that Malaysia’s GDP growth could at times fall short of the annual target on its journey towards becoming a high-income economy, he believes those external challenges would not pose much inhibition for the country to keep on growing its GNI, investment levels and the number of new jobs created to meet the ultimate targets set in the ETP.
“It’s more important for us to be focused on meeting the targets for those three elements that make up the country’s high-income agenda, even as the GDP growth fluctuates, because when we do, we know we are on the right track,” he explains.
As revealed in Jala’s recent presentation, the ETP at its nascent stage is already bearing some pretty good results.
Year-to-date, the programme has already realised some RM10bil worth of investments, or 64% of the RM15bil committed for 2011. Idris says the remaining RM5bil worth of investments will be making its way into the economy before the year ends.
So far, the Entry Point Projects (EPPs) have been progressing at very encouraging pace as well.
A total of 70 out of the 131 EPPs, or 53%, have already taken off. Thanks to some of the EPPs having multiple projects, the economy is currently seeing 97 projects in various stages of implementation.
Tourism NKEA
For instance, under the Tourism NKEA is the Johor Premium Outlets in Genting Indahpura. Already 95% completed, the project has been scheduled for a grand opening next month. So far, more than 80 designers and brand names have confirmed their presence at the Johor Premium Outlets.
Under the Oil, Gas and Energy NKEA is the Pengerang Independent Petroleum Terminal, which started its first-phase construction last month. The facility is scheduled for completion by December 2013 and the first oil is expected out in January 2014.
Under the Palm Oil NKEA, on the other hand, 186 mills with a dedicated quality enforcement officer have been established, thereby increasing the country’s oil extraction rate this year from 19.7% in January to 20.54% in September, and resulted in a RM2.2bil increase in crude palm oil production.
The other nine NKEAs financial services; wholesale and retail; information and communication technology (ICT); education services; electrical and electronic; business services; private healthcare; agriculture; and Greater Kuala Lumpur are also seeing encouraging progress in terms of project implementation.
“We are hitting all of them just about right. By being focused on the 12 key growth areas, the private sector’s confidence in the local economy has also increased,” Jala says, pointing to growth in private investments during the first six months of 2011 as evidence.
During the period in review, private investments outstripped that of the public sector after it registered a growth of 23.4% to RM51.2bil, representing 62% of the RM83bil targeted for the entire year.
In terms of GNI, Malaysia had already reached RM288bil, or 58% of its target for 2011, during the first half, and created 344,000 additional jobs, or 50% of target.
Drawing lessons from other economies that have made it from middle to high income, Jala is mindful that Malaysia cannot attempt to be the best at everything, lest it loses focus and ends up being just an average nation, while remaining trapped in the middle-income bracket.
“In this highly competitive world, we cannot afford to be Mr Average,” he explains.
Still, there is not shortage of critics who say the pace of project implementation under the ETP has not been up to mark. To this, Jala says, the Government has a whole list of projects listed on Pemandu’s website for all to check on the progress.
“Most projects are driven by the private sector; so if they criticise, they are actually criticising the private sector, not the government… the speed of project implementation in contingent upon the private sector to run,” he explains.
As far as the Government is concerned, Jala says, it has a governance structure to ensure delivery and the smooth implementation of projects.
“The NKEA and SRI teams are in constant contact with project owners. If there are any problems, we deal with it swiftly and promptly by escalating them to the respective steering committees chaired by the lead minister. Problems that cannot be solved at that level will be escalated to the Economic Council, which the Prime Minister chairs every Monday for three hours,” he explains, adding that he personally receives weekly reports from each of his team at 5pm every Friday with no exceptions.
Stuctural reforms
Jala emphasised that the ETP is more than just about achieving the numbers through projects, and that the Government is serious about structural reforms of the country’s economy to boost its competitiveness.
“There’s where we have the six SRIs to enable competitiveness to flourish in our economy,” he explains.
“It is absolutely critical for competitiveness to thrive in our economy, especially in times of a global slowdown, so that when the global economy rebounds, we can soar even higher. We have to build resilience so that we can continue to explore opportunities in times of crisis,” Jala says.
As part of an effort to boost the country’s competitiveness, Jala reassures the fact that the Government will continue to reduce its involvement in business to encourage the private sector to take over as the driver of growth.
The Government announced in July it had identified 33 companies ready for divestment. Under the plan to rationalise the portfolio of government-linked companies (GLCs), the Government will reduce its stakes in some of these companies, list a few others and sell the rest.
The divestment plan is still under way.
“I want to tell the private sector do not worry too much about the GLCs,” Jala says, adding that the Government is very clear of its role, and that is to be the catalyst for business growth, and not to be involved in business except in specific areas.
Four criteria
According to Jala, the Government has set four criteria under which its involvement in business would still be required. These include when the private sector needs co-investment in projects that are GNI-positive such as the regional corridor developments, when it involves national security such as defence and rice-production industries, when large capital investment is needed and the investment has long gestation period such as nano-technology. Another is in national infrastructure projects such as renewable energy and public transport.
Jala has observed that oftentimes, the people turn out to be their own worst enemy when it comes to the pursuit of economic success.
Malaysians have become too hung up on what he calls a “small piece of cake”, known as the domestic market. “We are all at fault for quarrelling too much among ourselves over the share we get out of this small piece of cake’,” Jala says.
“We cannot propel our economy by doing that. The huge market is out there,” he adds.
Instead of bickering, Malaysians should work together as one to produce “winners” that could be the “Apples” or the “Samsungs” of the world by 2020, Jala points out.
As the ETP enters its second year of implementation, Jala says there are calls for the Government to raise the bar higher after an encouraging performance during the first year. Nevertheless, new targets for 2012 have yet to be set and will only be identified when the Government sets new KPIs for the respective ministries at the end of this year, he says.
“We still have a long way to go to 2020. We’re on the right trajectory, but we’ve not achieved our vision just yet, so we can’t declare victory. We must remember this is not a sprint, but a marathon,” Jala says.
