Confusion Reigns On New Economic Model

DS Najib Tun Razak at last unveiled the New Economic Model (NEM) yesterday and... confusion reigns! Well... at least in this Malay Mind it does. And I am really hoping someone will set me right with regards to this confusion as I am sure to be asked at smaller and larger kenduri tables to media forums what I think of the NEM... well... it's confusing!

Lets first defuse the immediate impression from my words that I may not like the NEM's key thrusts. Actually, I don't. The idea of modifying the NEP and NDP statistical focus away from the broader population with targets based on race to a income defined basis makes some sense. Sure, it ignores some cultural aspects of Malaysian communities, but at least it highlights that Malays and Bumis make up almost 80% of the lowest 40% income earners of the population.

I also like some of the broader thrusts of the NEM, such as the call to revamp our education system (again...), an acknowledgement that Malaysian income levels are too low (which explains the government's ramping up of public sector pay, beginning with Doctors and Policemen), subsidies must go and most importantly, highlighting the old system (NEP and NDP) did not fail but IT WAS PATRONAGE THAT WRECKED THE OLD SYSTEM hence the new system must be immune to it!

Whilst the NEP and NDP laid the basis for pushing the nation up from the low income strata in the 70's to middle income by early this century, PATRONAGE, especially during its free reign in the Pak Lah era assisted by the post 90's Malaysian private sector doldrums following the economic crises. These two statements in particular clearly laid the finger on PATRONAGE as the reason for the weakness in our economy:

From DS Najib's speech: "There's a need to change rent-seeking and patronage system that has wracked our old system and the NEM must overcome this"

From the NEM: “To break the logjam of vested interests through political will and leadership”

However, despite all the glory promised by DS Najib's speech, questions remain.

Some would tell me to refer to the 200 page NEM book, which I will, but I have little respect for the thickness of the book, especially policy papers, as the Pak Lah's era has taught us that thick books embroidered by slogans and launched at 6-star expense may well amount to nothing if the content makes no sense. And the NEAC line-up to me is unconvincing. They are smart people I am sure, but their backgrounds risk the NEM being more 'academic' as opposed to practical.

Even at the 'academic' level, why is GDP being used as a measure on its own, rather than Purchasing Power Parity (PPP). On focus, whilst DS Najib proclaims the focus being the 40% lower income groups, how is the privatisation of Petronas' subsidiaries helpful to this group? Isn't this more exciting to the investment community, especially foreign investprs and Malaysia's high to medium net worth individuals? Or indeed how is who buys Pos Malaysia relevant?

The rhetoric justifying claims of the NEAC is also inaccurate. E.g., the exodus of highly skilled professionals from Malaysia is blamed on the absence of high value-add jobs and activities. This is not true. The truth is that MALAYSIAN RENUMERATION LEVELS ARE ARTIFICIALLY LOW! The jobs are there, especially in the public and GLC sectors, as many expats and consultants are hired for these jobs, also proving even GLCs can afford high income professionals! So?

This is the beginning of my analysis. And I am glad the government is seeking input. There will be loads!