The much anticipated “New Economic Model” (NEM) which has been much touted as the key pillar for change by the Prime Minister, Datuk Seri Najib Abdul Razak has been announced this morning.
Unfortunately, with all the hype created prior to the announcement, interested Malaysians and foreign investors are set up for disappointment. This cannot be clearer than the report yesterday by Reuters, which said
“According to a draft of the plans seen by Reuters, there are no firm measures to be announced, just a raft of ambitions for growth and to re-orient the Malaysian economy to high-value services and to boost domestic investment and consumption...The report by Reuters could not have been more accurate. The language and content of the NEM have been couched in the same fashion. Among the most tangible plans highlighted in his speech were on the 8 Strategic Reform Initiatives which focused on “Re-energising the private sector to lead growth; Developing a quality workforce and reducing dependency on foreign labour; Creating a competitive domestic economy; Strengthening the public sector; Putting in place transparent and market friendly affirmative action; Building knowledge base infrastructure; Enhancing the sources of growth; and Ensuring sustainability of growth”
Najib himself has promoted the NEM as a completely "new model" although many of the proposals such as shifting to an income based view of poverty from a race-based one have been around for years and were in the 9th Malaysia Plan.
Expectations that Najib will deliver a raft of privatisations that could cut the budget deficit are also likely wide off the mark.”
How different is the above and the bulk of his speech from the economic policy announcements by BN in the past?
In Tun Dr Mahathir Mohamad's last Budget speech 2004, he said
“We must persevere and stand up to face these challenges. We must enhance our sovereign competitive edge to enable us to compete with global players in the international market. This can only be achieved through increasing productivity, reducing the cost of doing business, acquiring technology and be more innovative. Efforts to improve the effectiveness of the public sector delivery system have contributed towards the efficient implementation of Government development policies and strategies. In addition, measures must be taken to effect a shift in the mindset of Malaysians to enable us to become more competitive.”In Tun Abdullah Badawi's inaugural Budget 2005, he said
“In order to achieve greater success, there must be a transformation in the way we do things and we need to refocus on key strategic areas. The outdated work systems and legislation need to be revamped and a positive culture inculcated to improve competitiveness and position Malaysia to be at par with the developed countries.And in Tun Abdullah Badawi's 9th Malaysian Plan 2006, he highlighted the need “to move the economy up the value chain”
“Moving forward, the Government intends to accelerate the transition towards a higher value-added economy. Priority will be given to developing products in new areas of growth. In this regard, domestic investments will be promoted while foreign investments will continue to be emphasised in selected and strategic economic sectors.”
“The Ninth Plan period will see changes in the structure and improved performance of the economy with every economic sector achieving higher value added and total factor productivity. New growth areas will gain in strength. Private sector investment will surpass the public sector in spearheading economic growth. The economy will become more centred on human capital, particularly with increasing competition from globalisation and progressive market liberalisation. Increasing the Value Added of Manufacturing, Services and Agriculture...Clearly from the above, the NEM announcement today by the Prime Minister is less of a much-needed transformation, but more of a “continuity” to past policies.
The Prime Minister has chosen to break the announcement of NEM into 2 parts, the first today, and the “details” only in June. It is disappointing that the Prime Minister has only chosen to make a high-level policy announcement, after 1 year in power, when such a policy announcement which is short on specifics could have been made more than 6 months ago.
The market is expecting market-changing measures to reform and transform Malaysia's economy. The Prime Minister's speech today certainly failed to deliver the goods.
We welcome the Prime Minister's admission of rampant “rent-seeking” and “patronage” in the existing administration and his call to stamp out such practices. But the devil will be in the details, and if the lofty goals are not followed through with tough new policies on open tenders and transparency, then the NEM will fail to achieve its goals as per its predecessors, the National Vision Policy, the National Development Plan which were heirs to the New Economic Policy.