NEM: Pakatan sets out acid tests for Barisan Nasional to prove its commitment to economic reforms

Press Release : Pakatan Rakyat Leadership Council

Pakatan Rakyat has scrutinised the 193-page report on New Economic Model for Malaysia (Part 1) prepared by National Economic Advisory Council (NEAC); released in conjunction with the launching of New Economic Model (NEM) by Prime Minister on 30th March 2010.

For a start, YAB Dato’ Seri Najib Tun Razak must clarify to the public the status of NEM prepared by NEAC for his Minister of Economic Planning Unit (EPU), Tan Sri Nor Mohd Yakcop has openly declared that NEM is a compilation of suggestions by NEAC forwarded to the government for consideration; and not government policy. This puts into question whether the Government is serious about the NEM, or it’s just another public relations exercise!

Nevertheless, Pakatan Rakyat feels vindicated that our diagnosis on the problems of the economy highlighted over the past 15 years is finally conceded by the Government. The NEM admitted that our “economic engine is slowing”, “private investors have taken a back seat”, “productivity is growing… far too slowly”, “we are not developing talent and what we do have is leaving”, “the gap between rich and poor is widening” and we are “stuck in a middle income trap”.

While the NEAC has finally recognised the severe problems the Malaysian economy faces, we are not convinced that the Cabinet is serious about reforming the economy. The objections in the Cabinet to the many recommendations of the NEAC have resulted in persistent delays in the announcement of the full NEM from last year, to February this year, to March, then June and now the 3rd quarter of 2010.

The speech by YAB Dato’ Seri Najib Tun Razak which said that “we can no longer tolerate practices that support the behavior of rent-seeking and patronage” rings hollow when we see how the same BN administration failed to achieve Tun Abdullah Ahmad Badawi’s call to rid the country of our “addiction to rent-seeking”.

We are concerned that the NEM will suffer the same fate as both the “Knowledge-based Economy Masterplan” and the “National Integrity Plan” which was launched by Tun Dr Mahathir in 2002, and Tun Abdullah Badawi in 2004 respectively. Both plans were launched with much fanfare, and both have been equally forgotten within a few years, despite their similarities to the proposed NEM.

In fact, Barisan Nasional never owned publicly to its failure to meet the economic growth and poverty eradication targets set for 8MP and 9MP. Malaysia fails to meet the growth target set in 8MP in any of the planning year. Moreover, since the overall GDP growth target of 6.0% on average was only achieved (or exceeded) in 2007, Malaysia is bound to fail to meet that target throughout the 2006 – 2010 period. Worse still, the overall poverty rate (based on the unrealistic 2007 methodology to define poverty) actually was reduced to just 3.6% in 2007 as opposed to the 8MP target to bring absolute poverty to 0.5% by 2005. It remains unclear whether Malaysia can lower the overall poverty rate further to meet the 9MP target of 2.8% by 2010.

The moral standing of Barisan Nasional in championing economic reforms contained in NEM is diluted further by its various contradictory decisions even as NEM was being unveiled.

The mystery surrounding the disappearance of RM52 billion worth of Bumiputra shares remains unexplained. Barisan Nasional does not even blink to provide an answer of how such a massive example of rent seeking and misappropriation of well-intended policies by the connected few went undetected for so long even as it preaches against rent seeking culture in NEM.

At the same time, the cost for National Cancer Institute (believed to be directly awarded to an unknown entity connected to the ruling elite) ballooned from RM340 million (when announced in 2007) to RM700 million in 2009. The escalation in cost is understandable – the unknown entity by the name of Kiara Teratai Sdn Bhd is expected to appoint IJM as a subcontractor for the project and in the process makes instant profit to the tune of hundreds million of dollars. If this is not rent seeking then Malaysia must be the haven of the commission takers of the world.

What is however, blatantly missing from the NEM is the fact that Barisan Nasional will remove various subsidies enjoyed by the rakyat today in the name of restructuring the economy, yet it continues to protect the “rights” of big private crony corporations to make exorbitant profits at the expense of the public.

Pakatan Rakyat has been consistent that the subsidy removal must be approached holistically – the restructuring of lopsided agreements and review of “corporate subsidies” to IPPs, water and toll concessionaires must precede the gradual removal of subsidies for the common people in order to lower their daily cost of living and enhance their quality of life. Such is the contradiction of NEM – Barisan Nasional advocates to the poor to embrace economic liberalisation and competition but is silent on removing protection and monopoly of the rich.

In fact, it is most ironical that the Prime Minister seeks to jointly develop 3,000 acres of land with the EPF, which does not have an expertise in property development, while at the same time preaching that the “the era of government knows best is over”, and the “private sector to drive growth”. Worse is the news that the overall project will be awarded directly to MRCB without any open, transparent and competitive tenders that makes a mockery of the NEM’s goals of “creating a competitive domestic economy” and YAB Dato’ Seri Najib Tun Razak’s call to not “tolerate rent-seeking and patronage”.

Hence the New Economic Model while having rightly identified and admitted to the weaknesses in the Malaysian economy, it has failed in its prescription by leaving out four critical elements which forms the acid test to ensuring a fully restructured economy. They include:

1. Restruturing of four key utilities namely electricity, water, toll expressways and broadband services to lessen the financial burden on the public due to skewed monopolistic commercial arrangements that favour big crony corporations, especially in light of TNB’s latest admission that the reserve margin in the country has reached a whopping 66% (which profits only the independent power producers and impoverish the rakyat);

2. Implementation of the necessary steps to bring the country closer to the introduction of minimum wage to reduce dependence on foreign labour, restructure and “push” our industries into higher value-added activities and to ensure a social safety net for the nation’s poorest.

3. Introduction of more support for young people and young families including review of areas that impose significant financial burden on take-home pay of young families and restructuring of income tax brackets; and

4. Reforms of key institutions that are central in restoring confidence, justice, fairness, competition and security to the economy such as the judiciary, the AG’s Chambers, MACC and the police force.

Lastly, Pakatan Rakyat reiterates that meaningful and holistic reforms must come first before any other fancy economic plans are brought into the picture as these reforms will strengthen the foundation of our economy. Only with strong foundation can we eliminate corruption and liberate the economy to adjust to whatever economic model we intend to put into effect.

Therefore, if Barisan Nasional is serious about re-making our economy and bringing it to a new era instead of just engaging in a well-staged public relations exercise, it must respond to the four acid tests outlined by Pakatan Rakyat which will ensure that the interest of the rakyat will be protected.

DATO’ SERI ANWAR IBRAHIM Opposition Leader and Ketua Umum, Parti Keadilan Rakyat

DATO’ SERI HAJI ABDUL HADI AWANG President, Parti Islam Se-Malaysia

LIM KIT SIANG Parliamentary Leader, Democratic Action Party