Media statement by Lim Kit Siang in Kuala Lumpur on Wednesday, 22^nd September 2010: 

How real is the Economic Transformation Programme?

The Economic Transformation Programme (ETP), the latest pronouncement by Minister in the Prime Minister’s Department Datuk Seri Idris Jala, follows upon a number of other pronouncements that have become the hallmark of Dato Seri Najib’s administration.

Like the previous pronouncements of 1Malaysia People First Performance Now, the Government Transformation Programme, the 10^th Malaysia Five Year Plan, the ETP is rich in rhetoric.

The sloganeering and spin that is common to all of these exercises provides a clear indication that the Government led by Najib is wholly at sea in tackling the enormous challenges that the country faces.

These challenges have accumulated over the wasted three decades characterized by mismanagement, corruption and abuse of power that has benefited a small coterie.

A common feature of the series of announcements is that they contain unrealistic assumptions about economic growth prospects; they use clichés that are taken from business school texts that have been spun in order to create a false impression of a rethinking of policies.

The various announcements of “policies” and “strategies” are littered with a slew of abbreviations such as KPIs, NKRAs, MKRAs, NKEAs, EPPs and BIZ Ops are freely bandied about.

Of late the Government has developed a passion for peppering every announcement with an alphabetic jumble.

It would appear that the Government has substituted sound policies with what appear to be tools from the corporate world.

These may be appropriate tools in the business world. The Government is not a corporate entity; it is accountable to the public and cannot be driven by notions of “profit”.

The concepts embodied in the ETP are beyond the comprehension of the public at large. We are subjected to lofty speeches peppered with colorful Power Point presentations loaded graphics that confuse rather than enlighten.

Each event at which these so-called policies are unveiled lays bare the inability of and impotence of the Government to boldly deal with the core and fundamental policy distortions that are responsible for the country becoming trapped in the middle income group.

The glimmer of hope offered earlier this year that the Government would embark on a path of reforms under the rubric of the New Economic Model has been rapidly extinguished by the ferocious attacks launched by PERKASA and its patron against any policy reforms that attempt to remove the distortions brought about by failed policies linked to the NEP.

The ETP acknowledges and reaffirms that the private sector will need to play a central and decisive role in enabling Malaysia to achieve a doubling of per capita incomes by 2020 through sustained economic growth of 6 percent per annum.

To attain these targets, private firms, according to Idris Jala, will invest US$ 266 billion (60 percent), GLCs US $144 billion (32 percent) and the public sector US$ 34 billion (8 percent), making a total investment of US$ 444 billion.

These assumptions – these it must be stressed are assumptions rather than forecasts – are wholly unrealistic in view of the historic growth rates attained over the past decade and a half and the current flows of FDI which are NEGATIVE in view of capital flight.

The underlying assumption appears to be that the private sector will make a remarkable shift without the Government doing its part. This assumption lacks all credibility as such a turnaround cannot be anticipated so long as the Government remains entrapped by the policy framework espoused by PERKASA and others of its ilk.

The ETP has set a target of US$ 444 billion for investment over the next decade. No overall macroeconomic framework has been presented, a practice common to previous Perspective Plans. There is hardly an indication of how this amount of investment will come about.

The reality is that FDI has declined in recent years with no sign of a revival; at the same time domestic savings are not being fully invested with capital flight becoming sizable.

There are few indications that FDI will revive and take off without a radical change in the investment climate e.g. implementation of reforms of the type talked of in the context of the NEM.

It is becoming abundantly clear that the NEM is going nowhere. A weak and divided Government is now being held hostage by PERKASA and the die-hearts in UMNO.

Domestic investors are fighting shy and if anything voting with their feet by engaging in the capital flight. Idris will have to do better if he is to be believed - more details of specific projects will be needed before he is taken seriously.

Be it as it may, there are other curious and contradictory features of the ETP. On the one hand the formulation is built upon the notion that the private sector will be unleashed; and yet the ETP is a top-down creation.

PEMANDU is seemingly picking “winners” and it would imply that Malaysia is about to embark upon a new form of central planning to get to highly untenable targets.

The approach contradicts the very notion that the private sector will be freed to make investment decisions without interference from the Government.

A grave omission in the ETP is the singular lack of an articulation of changes in the policy regime to arrest corruption, increase competitiveness and transparency in procurements, introduce meaningful safety net programs, rationalize labor market policies including the adoption of a minimum wage policy and the abolition of anti-competitive measures e.g. APs.

The failure to deal with the issue of tax reform within the context of the ETP is yet another indication of the lack of an integrated and wel-designed programme of reforms that are imperative if the private sector is to be permitted to function effectively.

It is hard to believe that the Government anticipates that the private sector can be induced to perform as if by Royal Command.

The mind-boggling and totally unrealistic pie in the sky nature of the ETP and the linked announcements may well become Malaysia’s version of Mao’s GREAT LEAP FORWARD fiasco that was built on unrealistic targets and dubious performance indicators. Micro management and planning of the kind--- to planning for Bird Nests and Bird spit production as part of the effort to double incomes! – cannot be taken seriously.

To resort to what is obviously a system of central planning --- with unrealistic targets, dubious statistics to show “performance”, picking “winners”, maintaining constraints to growth via quotas and a system of approvals together with subsidies to corporate entities (both GLCs and selected private corporate tycoons) --- is totally in contradiction to the announced intent to let the private sector act freely.

Indeed, the system the country appears to be slipping into has many of the features that brought about the collapse of the Soviet economy in the late 1980s. It is also salient to note that the remarkable success of China and its modernization program which can be attributed to the dismantling of central planning is being largely ignored.

The real danger is that the country is going nowhere until there is a determined effort to implement real reforms.

Each day it becomes clearer that Najib does not have the strength to get out of the quicksand he is caught in.

He cannot go on much longer singing the APCO written songs. These are no longer being reported in the Utusan, an organ that in the scheme of things is supposed to sing songs desired by Najib. Now that it is openly becoming a mouthpiece for Mahathir and PERKASA, the end may not be far away.

*Lim Kit Siang, DAP Parliamentary Leader & MP for Ipoh Timor