Quick Thoughts On The 10th Malaysia Plan

I haven’t read through the document yet, but I’ve got my hands on a nice summary (thanks, Abbas). Recall that the Malaysia plans outline (and only outline) the spending priorities of the government’s development budget over the next five year period (2011-2015). In addition to this, the 10MP also incorporates the implementation side of the New Economic Model, which has laid out some of the key strategies that are intended for the achievement of high income status by 2020.

I’ve made no secret that I don’t think high income status would be that hard to come by in the time frame allotted, nor that this status would be significant of itself. Under those circumstances, it’s more important to define the kind of economy and country we want to be, rather than the achievement of some nominal income figure that isn’t meaningful since it also requires the price level (and thus potential income inequality) to rise.

With that in mind, I’m framing my comments based on the key areas touched on:

1. Attracting Talent: It’s notable that many countries talk about halting their own “brain drain” and attracting “brain gain”, so we’re hardly alone in this area. There have been a lot of ideas and a lot of policies tried; but with very few exceptions, not much success. I really don’t see anything in the mooted policies and incentives here that will guarantee success – I think only a complete lowering of entry barriers and a really, really, really low level of income tax would be effective. On the other hand, success, as in a highly visible and concrete pace of economic growth and prospects, is its own virtue – if everything else works, so will this, but not before.
2. Enhancing Bumiputera economic participation: I was going to say that there’s not much change here, but looking at the figures, Bumi households aren’t that far off from the national median income (about 10% below). The key here is more on tackling income inequality. The 30% corporate equity figure is I think lip service to Perkasa and Bumi sensibilities, as I don’t think it’s really achievable in the foreseeable future. Ironically, the 10MP talks about emphasising institutional aggregation of investment funds via unit trust schemes, completely at odds with what Bursa Malaysia has been pursuing.
3. Raising Employment: 2.4% employment growth is lowballing the numbers required, which suggests that the unemployment target of 3.1% by 2015 is probably out of reach. The age cohorts entering the workforce over the next five years implies a required growth rate closer to 2.8%-3.0%. Did anyone actually model this, or were they working off of the crude birth rate?
4. Reforming the Labour Market: Lots to like here, and echoes the NEM. Easier hiring and firing might make the trade unions (and most workers) antsy, but reduces the cost of labour and increases efficiency. I love the pending change in employment regulation to regularise part-time employment, which would help both workers and employers (but implementation is always a bugbear). Increasing female labour force participation is something I’ve advocated for some time, although on deeper reflection, it’s something that will happen eventually due to the increased levels of participation for younger women. I think the allocation for the Relief Fund for Loss of Employment won’t be enough given the disruptions the change in development model will bring.
5. Infrastructure: My thoughts on broadband were posted this morning. Energy security by utilising coal and LNG isn’t terribly environmentally friendly.
6. Socio-economic development: Lots of targets, precious little in the way of effective policies, except the proposal for amalgamation of agricultural land which will unfortunately be conducted via RISDA and FELCRA. Where’s the profit motive? Let the private sector do this!
7. Social Safety Net/Special Target Groups: Not before time, this one. And it should make Sabahans and Sarawakians happier, or at least less upset.
8. Education System: Entry age for schooling lowered, and kids get even more pressured, but I think this is probably necessary for poorer households to catch up. Holding schools accountable is hypothetically great, but I’m wondering about implementation here. Has anybody tried this before, and what were the outcomes? Higher pay and better career paths for teachers is way overdue. Technical and vocational education in the mainstream? Yes!!
9. Vibrant Liveable Cities: I see potential for a lot of pork-barrel projects here.
10. Safety: Lots on enforcement, not so much on prevention except for improving rehab of drug addicts.
11. Valuing the Environment: This conflicts with the goals and policies planned for energy security.
12. The 12 NKEAs: I have little argument here, though I’m not too sanguine over the prospects in the broader agricultural sector, as long as there is a focus on smallholders. Cooperatives just won’t cut it.

Technical Notes

The 10th Malaysia Plan, Economic Planning Unit