Thursday, May 12, 2011

Debating the ETP

Last night there was a debate hosted by the LSE Alumni Association, on the key challenges for the Economic Transformation Program (ETP). Moderated by Tan Sri Dr Munir Majid, the panel speakers were YB Tony Pua (MP for PJ Utara), Tan Sri Dr Ramon Navaratnam (former senior civil servant and noted economist), and Datuk Ahmad Zaki  Zaid, (Executive Director of MRCB). Also present were representatives of PEMANDU, the organisation tasked with leading the implementation of the ETP.

As you can imagine, there was a lot of scepticism regarding the ETP and Malaysia’s achievement of high income status by 2020. Questions and comments from the floor were pretty numerous and I think out of the norm for a Malaysian audience – perhaps a reflection of the participants.

I think the main takeaway was a deep rooted fear that the government does not have the political will to fully implement the recommendations of the NEM – the original hard-hitting Part I of it. There was general agreement that, as government policy documents go,  the NEM and ETP were first class in outlining what should be done. But as TS Ramon said last night, politics are getting in the way of implementation – poli-“tikus” as he put it.

Personally, I don’t have any doubts about getting to the USD15,000 GNI per capita target. I even think we might get there early. But I do have doubts on whether getting there would be meaningful for the man on the street.

From my viewpoint, the main beneficiaries would be those who have skills (about a quarter of the workforce), and owners of capital. They’ll take the lion’s share of the increase in income, whereas the only substantive support for the lower income group would come from the yet-to-be-implemented minimum wage, and any pressure that the also-yet-to-be-implemented National Wage Consultative Council can bring to bear on employers. But these measures would only put a floor on wages, not generate the overall wage inflation that’s needed to raise incomes and living standards.

The ETP appears to focus exclusively on bringing up private investment, which is a worthy goal in itself. But while that might increase headline GNI per capita, nothing says that any increase would trickle down to all workers, or be shared proportionately between the factors of production. We can’t assume that the ratio of factor payments will remain constant, especially in an environment of structural change that we’re contemplating. In technical terms, labour might not be paid the value of its marginal product.

I think distributional issues are going to be the bugbear of Malaysian politics come 2020. The issues raised during Singapore’s recent elections may be a harbinger of Malaysia’s future.


  1. low income low income low income!!!
    middle class income middle class income!!

    who get the most bigger cake??

  2. the first step in the high income journey is a clear human resource policy.Clear means specific numbers.
    ETP is a failure.Its just the SOP of the past dressed in new clothes.Its similar to the corridor concept of drawing a big circle and calling wats inside as a corridor project.Similarly for ETP. . .its rounding up project by others and giving it the EPP chop.So why would anyone try so hard including sitting 8 weeks in Labs?Companies wants to profit. .the higher the better.So forget altruism.
    ETP will create about 1.1 trillion GNI with investment of 1.4 trillion.CE element of that 1.1 is about 300 bil.Thus EBITDA is 800 bil i.e a return of 60% on investment.
    Meanwhle CE growth of only 3.5%.
    Tough lessons in planning.But most banks would not employ robbers to design their security system.