Tough questions posed at launch of NEM
KUALA LUMPUR, March 30 — A swirl of excitement, confusion and scepticism surrounded the launch of the New Economic Model (NEM) today, which was described by Prime Minister Datuk Seri Najib Razak as the “backbone” of his administration’s long-term policy.
During a long and impassioned 18-page speech introducing the NEM at the Invest Malaysia conference today which was delivered in a fast and furious manner, Najib’s announcements of the initiative to make Malaysia a high-income nation were punctuated by applause though the atmosphere was also quite sombre due to the context of the speech which detailed the challenging position Malaysia finds itself in.
Some — such as RAM chief economist Dr Yeah Kim Leng — gave the NEM a thumbs up and even DAP MP Liew Chin Tong, who was at the conference, said he does not want to write off what was announced today as it was a good statement from the prime minister and it was also a step in the right direction.
The stock market, however, failed to rise significantly after the announcement and ended almost flat for the day while some at the conference, including at least one banking executive, expressed private reservations over the NEM, saying that they were not excited by it.
This could be due to the nature of what has been disclosed thus far. While not many would object to the overall goals and objectives of the NEM — to make Malaysia a high-income nation — there was many questions over the details, which will not be revealed until months later — June at the earliest — and also over the extent of constraints the NEM will face.
Najib himself sounded a battle cry during his speech, saying that rent seeking and patronage which tarnished affirmative action will “no longer be tolerated” and committed himself to see through economic reforms.
“I pledge this: we will work tirelessly to develop and implement the economic reforms that our nation needs to grow, our businesses need to succeed and, above all, for our people to prosper,” he said. “Some people are questioning the need for urgency to break the habits of the past. Do not be fooled. We need a new way of doing things. We must act now to position Malaysia for the future. We need to have a sustained and consistent big push if the reforms set out today are to gain momentum and help us achieve our goals.”
Despite the public assurances of his commitment, many members of the media were still unconvinced partly due to recent postponements of the implementation of fuel subsidy withdrawal and goods and services tax (GST), partly due to speculation that Najib would only move to implement reforms after he has secured a fresh mandate from a general election and partly from fatigue from unkept promises by previous administrations.
The prime minister did not meet the press at the conference but several National Economic Advisory Council members, who drafted the NEM, engaged the media in Q&A sessions where the main topic of conversation was whether there was sufficient political will to see through reforms.
“The measures proposed are hailed but realistically, does the prime minister have the strength or the will to implement it after seeing how the GST and move to cut subsidies was put off?” asked one reporter during the Q&A session.
“The way I hear the prime minister and Idris Jala (who is in charge of the government transformation programme), there is as strong a political will as anywhere in the world,” replied council member Danny Quah, a professor at the London School of Economics.
“The recommendations are still at the discussion stage but by the tone and language used by the prime minister during his speech, he quite likes the NEAC’s bold recommendations,” said council chairman Tan Sri Amirsham A. Aziz in reply to a similar question.
The line of questioning continued until Amirsham asked a reporter, apparently out of exasperation, if she heard the prime minister’s speech earlier.
Many questions were also asked on whether the public was willing to change — read: the rent seekers and those hooked on subsidies — to which council member Datuk Hamzah Kassim, CEO of Innovation Associates, replied: “The most challenging part is social transformation. People must feel that they are on a burning platform.”
As for questions on whether the public consultation process would result in the NEM being watered down, Quah replied: “We live in a democratic society. There is political realism, and the consultation process I view it positively. It (the NEM) is an overall strategy with an end goal but respecting the wishes of citizens.”
There was also some criticism that there was “nothing new” in the NEM but Quah said the council was not aiming for “new and novel” but wanted to do something “good” by proposing strategies to increase the nation’s productivity and at the same time not de-emphasising capital accumulation.
Another council member, Datuk Seri Panglima Andrew Sheng, Adjunct Professor, Economic and Administrative Faculty, University of Malaya, referred to table C on page 15 of the report which detailed the differences in approaches recommended in the NEM such as the old approach of growth through capital accumulation versus the new approach of growth through productivity.
Amirsham also appeared careful when discussing the issue of declaring outright if race-based policies are in or out, a key line of questioning by some reporters, but did confirm there is no proposal for race-based equity targets.
It appears that the NEAC would like to see lower value government tenders reserved for Bumiputera entrepreneurs to encourage business participation from that community but the proposal is for the contracts to be awarded in a fair and transparent manner. Amirsham however stressed that it was all the government’s decision.
The NEAC chairman also shared a personal anecdote on what he meant when he said he was pushing for productivity-led growth. He said that when he had joined his wife who was studying for her master’s degree in the US, he had observed the garbage trucks being manned by only one person.
“I thought to myself, in Malaysia, there would be one driver, one to pick up the rubbish and two or three people hanging on the back,” he said. “If we can reduce the number of workers by multi-skilling them, we can pay them higher wages and also save cost for the country.”
The council members also said that the 191-page NEM report was open for “constructive public feedback” and after the two-month feedback period, a final report will be prepared by June which will then be incorporated into the 10th Malaysia Plan and the 2011 Budget.
The highlights of the report are that it aims to double Malaysian incomes to at least US$15,000 (RM51,000) by 2020 while reforming affirmative action to make it more market-friendly and also restructure the economy to make it innovation- and productivity-driven.
It also emphasised the themes of inclusiveness and sustainability and listed some of the expected benefits such as a higher purchasing power for the people, safe living and working environments, and sound management and preservation of natural resources.
“In this regard, this is a defining moment for Malaysia,” said Najib in the closing of his speech at the conference. “As we emerge from a global recession, will we have the courage and vision to pursue an ambitious agenda for change that can seem daunting but is essential for our nation’s future? Our answer is to create high-wage jobs, give our children the best educational opportunities, and attract the high-quality investment that is the driving theme of this important gathering.
“But this is more than the economic goals of our nation. This is about the life chances open to future generations. This is about raising the sights of low-income families to help them out of poverty. This is the very fabric of our society where we each have opportunities and responsibilities. It’s about placing Malaysia at the forefront of a high-income economy so that we can stand shoulder to shoulder with other developed nations. I am confident — with your support — we will choose the right path, move forward, not back, and build a fairer, stronger and dynamic Malaysia for many decades to come.”