The 10th Malaysia Five Year Plan : Old Wine in New Bottles – Part 2 (Overview)

An Overview of the Plan

The Plan that has been unveiled, when stripped of the rhetoric and clichés, represents nothing more than a reaffirmation and continuation of past and present policies. To begin with, the Plan is built upon a number of highly questionable assumptions. These include:

• GDP growth rate of 6 percent as against 4.2 percent between 2006 and 2010

• Exports are projected to expand by 10.1 percent as against 3.6 percent recorded during the 9th Plan period.

• Private investment is projected to grow at 16.2 percent during the period of the 10th Plan versus 6.2 percent during the 9th Plan

• Per capita income in 2015 is estimated at RM 38,845, increasing from RM 23,841 in 2009. This is based on a growth rate of 8.0 percent per annum for the Plan period. No explanation is offered as to why there is a sizable discrepancy between the projected GDP growth rate and the per capita income growth figure. The Plan anticipates that in US dollar terms per capita income will almost double between 2009 level to US$ 12,139.

• The Plan calls for development expenditure of RM 230 billion. Of this, RM126.5 billion or 55% is allocated for the economic sector,RM69.0 billion or 30% for the social sector,RM23.0 billion or 10% for the security sector and RM11.5 billion or 5% for general administration. This allocation includes a Facilitation Fund of RM20 billion to promote private sector investment in strategic priority areas including infrastructure, education and health.

It is most significant that there is no full discussion or presentation within the main document of how the Government plans to finance the projected expenditures. This is a departure from established and prudent planning principles. Financing the projected expenditure will inevitably demand massive borrowings, both domestic and foreign. This is evidenced by the sharply increase in debt servicing – increasing at 9.4 % during the Plan period. The rhetorical and inconsistent ministerial statements on the need to reduce subsidies on the one hand and to broaden the tax base via the introduction of a regressive GST are hardly mentioned in the Plan document. Significantly, the Table laying out the fiscal numbers indicates that the estimated subsidies paid out in 2010 amount to RM 18.3 billion and these are projected to decline to RM 15.7 billion by 2015. The reduction of RM 2.6 billion is a paltry sum in an Operating budget of over RM 200 billion. There are indications that the Plan has been crafted in an irresponsible manner and the true resource needs have been ignored; an alternative interpretation would be that the underlying fiscal policies will be driven by a combination of an increase in the tax burden on consumers via a new GST and massive borrowings. These actions will inevitably have devastating consequences for fiscal responsibility. Furthermore, living standards will be affected and contribute to a higher the incidence of poverty. Both consumer subsidies and consumer taxes have a larger than proportionate impact on the lower income groups, the every groups who are ironically the supposed target groups for upliftment.

Significantly, both in the current ongoing debate about subsidies and in the Plan document there is no mention of the billions of dollars that are channeled to corporate cronies and GLCs by way of tax rebates, grants, toll concessions, loan guarantees and write offs of losses and other obligations. It is legitimate to ask as to why there is no mention of an intention to review these calls on the national budget. Equally significant is the absence of any discussion of potential cost savings by trimming the size of the bloated public sector now employing 1.2 million employees despite privatization of many services; nor is any mention made of the potential savings were the government to adopt competitive bidding processes in its multi-billion procurement of goods and services.

The new Five Year document shows a lack of intellectual rigor. Its overall incoherence, its clichés and stereotyped phraseology give the impression that the Cabinet, the Economic Planning Unit of the PM’s Department, and the other authors (foreign and domestic) assembled the Plan from the boilerplate of bureaucratic discourse and business school jargon with contempt for Malaysians to whom it is addressed. It is long on the so-called achievements backed up by some dubious and selective statistics. It reveals the administration’s response to the nation’s need for an agenda by offering a convoluted rojak of discredited ideas with some rhetorical sops to segments of the population mixed in.

The Plan’s only visible purpose is to lay out a program of spending some RM 230 billion over the next five years. The only actual “strategy” that can be deduced from it is that the administration wishes to continue doing what it has done but with a greater vengeance. The measures outlined are unlikely to enable Malaysia attain the highly inflated projected GDP growth rates and achieve developed nation status by 2020. This goal is unachievable by way of the mere proclamations and many assertions lavishly embedded in the Plan. To achieve this goal, the Malaysian economy would need to grow at 6 percent per annum, a rate well above the rate attained during the 9th Plan period. The projected private investment growth rate of 12.8 percent per annum in the 10th Plan period versus the 2 percent achieved in the recently completed 9th Plan is clearly unattainable. Serious readers and analysts, including potential investors, will inevitably conclude that the Government is not serious about addressing the real issues and concerns. They will further conclude that past ruinous policies will continue and the main beneficiaries will be the well connected, the cronies, and the chosen few that will receive lucrative contracts, licenses to collect rents and thus corruption will be fed new grease to move along unabated. The poor, the vulnerable and disadvantaged segments of the Malaysian population will continue to bear burdens. Good governance and transparency will remain distant rainbows.

Although no details are given, the Plan proposes a new round of privatization. It would appear that public assets will be turned over to the rentier class aligned to the regime. If the past is any guide, these transfers will be done in less than transparent ways. The question arises as to why it is necessary to embark upon a new round of privatization given the disastrous past track record of abuse. Equally troubling is the silence on the issue of how the Government proposes to tackle and control loss making GLCs that require bailing out. How many billions will the Government deploy to save entities such as Sime Darby and the Pos Malaysia? Is it the intention of the Government to start granting interest free loans such as to the private water utility company Syabas that had cost the government RM250 million as it had to borrow the money in order to lend it interest free?

The Plan document makes a radical departure from past Plans by not incorporating the amounts that are to be expended on individual programs and projects. These details are to be revealed at a later date. This is tantamount to requesting Parliament to provide a virtual blank check.