The very long run

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ETP implementation in full swing; it’s a marathon not a sprint, says chief.

Two years since the pledge from the government to turn Malaysia into a high income nation by 2020, Pemandu is reporting that the Economic Transformation Programme (ETP) is well on target.

Minister in the Prime Minister’s Department and CEO of Pemandu, Senator Datuk Seri Idris Jala announced 10 key achievements of the ETP ahead of the release of the second annual report due early next year.

By World Bank definitions, a high income economy reports a gross national income (GNI) per capita of at least US$12,476. By that yardstick, the government has set a target GNI of RM1.73 tillion by 2020 which translates into roughly US$15,000 per capita.

Transformation however, does not imply the sole pursuit of income growth. The ETP stresses inclusiveness and sustainability in its endeavours as well, hence Pemandu’s efforts to facilitate programs and infrastructure development to benefit low income groups and the rural population.
For these efforts to be funded, “the economy has to grow,” Idris highlights.

And grow it has – at an impressive clip. Malaysia reported GNI per capita of US$6,700 in 2009 which was before the ETP took shape. That figure expanded 45% to US$9,700 in 2011. At that rate, Malaysia could achieve its target US$15,000 well before 2020, Idris noted. In 2018, to be specific.

The economy grew 5.3% as at the third quarter, outpacing regional economies such as Singapore, Thailand, South Korea, Taiwan and Hong Kong. Reinforcing the point about growth needing to happen so that government has the funds to invest in inclusive initiatives, last year’s 5.1% GDP growth accrued a total revenue of RM185 billion for the government – its highest ever.

One of the aims of the ETP is to see private investment exceed public or government investment. In 2011, private domestic and foreign investment had reached a 10-year record high. As of Sept 2012, private investment grew by more than a quarter from the previous year, reaching a new record of RM112.2 billion. In 2011, private investment accounted for 57% of all investments. The private sector’s share continues to rise in 2012, reaching 63% as of Sept. Idris stressed that investments by government-linked companies were strictly classified as public investments.

Such vigorous investment activity is observed in the Entry Point Projects (EPPs), in which the ETP has placed great focus. When the ETP was first announced there were 131 EPPs. Since then, Pemandu has recorded a total of 152 EPPs involving both private and public sectors, out of which 149 projects have been announced with a total committed investment of RM212 billion.

The projects range from large scale infrastructure development such as urban rail development, to smaller scale projects that help sundry shop proprietors improve their business strategies.

“Concurrently, the projects are progressing well. Out of the 152 EPPs so far, 93% are already underway, out of which 36% are currently operational,” Jala said.

In addition, the government introduced the Competition Act in 1 January, liberalised 15 out of 17 sub-sectors and set a minimum wage that swings into force next year. These measures fall under the Strategic Reform Initiatives (SRI) of which 51 have been proposed.

With private companies taking the lead on spending, the government is able to reduce its fiscal deficit, bringing it closer to its aims of balancing the budget by 2020. Deficit reduction has been consistent since 2009, declining from 6.6% of GDP to 4.8% of GDP in 2011. Fiscal prudence is a priority and Malaysia has a self-imposed debt ceiling of 55%.

In a boost to the country’s image, international organisations have recognised Malaysia’s progress. For example, the World Bank raised Malaysia’s global ranking from 18th position to 12th position in its Doing Business Report. At Kearney’s FDI Confidence Index for Malaysia has risen from 21 in 2010 to 10 in 2012, putting it ahead of South Korea, Thailand, and Vietnam. The IMD World COmpetitiveness Yearbook ranking shows Malaysia rising from 16th place in 2011 to 14th in 2012. And in an added bonus, Kuala Lumpur was ranked as the fourth best shopping city in the world. Meanwhile, Harvard University and Princeton University have published case studies on the transformation of Malaysia which are used in their teaching courses.

The ETP’s achievements against the Key Performance Indicator this year was at 94% as validated by PricewaterhouseCoopers.

Photo courtesy of Flickr User Alex E. Proimos

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