by Dr Chen Man Hin, DAP life adviser
The ETP (Economic Transformation Programme) without the New Economic Model (NEM) cannot achieve a high income economy for the people of Malaysia
Immediately after the UMNO assembly where the delegates unanimously rejected the NEM proposal to liberalise the economy beginning with the removal of the 30% bumiputra equity. There was alarm that this would mean the end of the NEM which was promoted Najib since he became Prime Minister.
To assuage the fears of investors and the economic and business world, PM Najib quickly assembled a coterie of 10 foreign investors before a gathering of a few thousand people, PM Najib presented them as multi-billion investors who are investing in the country. They were the pioneers of the ETP which is expected to harvest some US$444 billion of projects to propel the economy from a middle income to a high economy status by the year 2020.
This translates to bringing in investments averaging 1,300 billion ringgits a year. The government expects 99% of the money to come from the private sector.
The big show on ETP presenting ten tycoons, could only collect US$5 billion. This is a pittance compared to the 1300 billion ringgits per year needed to reach a high economy status. There is a very long long way ahead for the Prime minister.
These days investments are hard to come by. The investment confidence is low. It is well known that FDIs into Malaysia fell 81% to US$1.36 billion for 2009 compared to 2008. Malaysia FDI was lower than the FDIs to Thailand and Indonesia. For the first time FDI to Malaysia was lower than the US$1.95 billion FDI into Philippines.
To reach the targeted figure of US$444 billion by year 2020, which amounts to 1,300 billion ringgits a year is a tremendous task. The RM5 billion promised at the big ETP presentation is a pittance. It will be harder to attract investments with the 30% bumi quota levy on investors both local and foreign.
There are many factors causing Malaysia to be unattractive, some of which are corruption, lack of skilled workers because of migration, crooked judiciary, no rule of law but most all the NEP. The NEP insists that investors, both local and foreign, must surrender 30% of their equity to bumiputras. Investors prefer to invest in a country that has a liberal free market.
The insistence at the UMNO Assembly that the 30% bumiputra equity be retained. They prefer to have the NEP rather than the NEM. This will cause foreign investors to stay away.
LEARN THE LESSON OF THE MAHATHIR ERA
PM Najib has embarked on a policy of huge spending on projects and building monstrous structures to uplift the economy. Mahathir built the twin towers. Now Najib wants to build a 100 storey Merdeka Tower. The economy under Tun Mahathir progressed but at a much slower rate than the four Asian Tigers of Singapore, Hong Kong, Taiwan and S Korea. The Tun could not accelerate the economy because the economy was dragged down by the NEP, which drove investors away.
Now PM Najib is following the way of Mahathir. Under Tun Mahathir and later Abdullah, the per capita income in 2009 was only about US$8,000, compared with the US$34,000 for a Singaporean, US$32,000 in Hong Kong, US$19,000 in S Korea and US$17,000 in Taiwan, why is Malaysia left so far behind. The reason is a liberal free market economic system in the four tiger economies. Malaysia spent profusely, but it has no free market because of the NEP which caused investors both local and foreign to stay away. Malaysia is not on the radar of investors any more.
The UMNO Assembly has stressed that it wants to keep the 30% bumi equity of the old NEP. They do not want the economic structuring or liberalisation as practised by the Tiger economies. As PM Najib cannot have the NEM but must follow the old NEP, the prospects of transforming a middle income economy to a high income economy are extremely dim.
Should we standby and let the rot continue?