Friday, April 2, 2010

New Economic Model, Meddle, or Muddle?

So the New Economic Model or Model Ekonomi Baru had been announced in installment by the PM Datuk Seri Najib Tun Abdul Razak. It was announced at an investment seminar held in a hotel organized by the private sector. The PM promised more details on the NEM would be forthcoming. I am given to understand a copy of the plan, 200 pages thick had been released to the public. I have not had the good fortune of laying my hand on a copy, so the privilege of digging through this document eludes me for the moment. In the following, I thought I would respond to the PM's speech in announcing and outlining the MEP.

The NEM seems to be more of a statement of good intentions, almost bordering on a wish list of what could be nice to have for our economy. Take for instance the reference to the 6 key transformation index, coupled with the goals of high income, sustainability, and inclusiveness with no groups being left out in partaking the fruits of development. There is not much to discuss, to disagree on all these tempting prospects. All sound minded citizens would like to have a higher income, what more doubling it in say ten years. All of us would love a good public transport system, the check of corruption, more vibrant private and public sector, better education system, work force training and upgrading, fair competition and equal opportunities for all, a better balance between good economy and good life for all, In short, the NEM promises everything to everybody.

Another notable feature of the NEM, at least as expounded by the PM in his speech, is the profusion of generalities, precepts and rather vague pronouncements, at least in the context of an economic model which ought to be clear, rational and pragmatic in terms of means and ends. I admit there are parts of the speech which are clear, but where the speech is clear, it merely touches on basic precepts or fundamentals of nation building which should be part and parcel of the nation's build up, regardless of ‘model’. Some examples should include higher income, better education, better quality workforce, national resilience and less ‘dependence’ on foreigners, transparency in economic development, people’s involvement in development process, equal opportunity for all, the need to be bold and courageous in adjusting to the contemporary challenges, and many more really! Again, of course we agree to all these, and yet we are left wondering as to the real import of these pronouncements, what are their contextual operational meaning, how would they be implemented and what form would it take when finally translated into reality.

Apart from the mere statement of good intention and generalities in many places, there are few aspects of the NEM I should like to highlight and comment on. Obviously the NEM sets a high priority on attracting foreign investments into the Malaysian economy. Many of the main features of the NEM had been put in place precisely to appease the demands of foreign capital. The liquid and free nature of foreign capital is of course part of the reality of the global economy. Foreign capital can be one of the major factor is spurring the economy of a developing nation. However, we need to be mindful that it is not the panacea to all economic ills, and history had shown that clearly.

There are nations and economies in which foreign capital had been a major contributor to development, while there are just as many where foreign capital merely led to parasitic relationships that simply drains and sapped the host nations or economies dry. There are many examples from the experience of South American nations and other parts of the world, constituting the developing nations. Ultimately, it is not the presence or absence of foreign capital that is crucial but the management of the relationship and the dynamics between host nation and foreign capitals. This would be the final determinant. Study the cases of successful Southeast Asian and Asian nations in this regards.

The NEM also places much faith and reliance on the private sector in spurring the Malaysian economy. I take it that the NEM proposed to corporatize MIDA in line with this spirit. Again it is a fact that in all capitalistic or liberal economy, it is the private sector which functions as one of the main engines of economic development and growth. Again it must be said that corporatizing public institutions is not by itself a panacea to all our problems. What is crucial in public agencies or corporations is good leadership and good management. Without this, all institutions, public or corporate, cannot function as effectively or dynamically as we hope. More importantly, public or corporate, all institutions would be crippled and paralyzed by corruption and vested interests. This is where the government should be more mindful of in overseeing its institutions and agencies, public and private. If at all, without this all important pre-requisite, corruption would even be more rampant in corporatized institutions, where there are greater opportunities for corruption and abuses with less public scrutiny and control.

Under the NEM, the EPF would be allowed to invest abroad or globally. I admit that many opportunities abroad beckon our investment, but so are the great risks associated with them. What with all the memories of the mega scandals that had sparked the present financial crisis globally. Are our fund managers and captain of industries, capable enough to overcome the hazards of a global player? Please don't misconstrue my point as lacking confidence in our financial experts and captain of industries. But we know how many Gulf States economies are in hot soup today due to inexperience and uninformed ‘ aggression’ in investment. I have not even discussed the scruple factor in ensuring good and profitable investment of our hard earned workers fund. Aren't there enough opportunities for local investment, ensuring save returns for our EPF? Are the current investments of the EPF proving to be profitable in all areas that we need to expand abroad and not consolidate locally? I would urge caution here because this idea does not involve just any fund but the hard-earned money of our workers and citizens.If the limitation is a question of law and enactment, these can be amended on good grounds.

Listening to the speech, there is the nagging feeling of irreconcilable principles and precepts. In the PMs speech inaugurating the NEM, there is the pledge of affirmative action, of ‘welfarism’ , in the same vein as meritocracy and corporate adventurism. There is admission on the part of the PM that the NEP had served the nation well, but he feels the need now to give it a new context. What could the new contextualisation of the NEP within the NEM? There are not many specifics and explanation. I tend to deduce the following from the whole spirit and tenor of the text of the speech. Can it be that the NEM is opting for something we might term as ‘ selective affirmative action’? In the past the NEP was inaugurated with objectives of eradicating poverty and restructuring the economy, but ended in the end as the ideology of Malay capitalists or corporate interests. Patronage of Malay businesses was a deviant and a departure from the original intent and goals of the NEP then. Has the NEM decided to legitimize and ‘formalise’ these departures and deviance of the NEP and make them integral part of its vision and mission? Putting it differently, the ‘contextualization’ of the NEP enunciated by the NEM could be the withdrawal of affirmative action for Malays in general and reaffirming it only for Malay capitalism and corporate interests. We got a hint of this scenario when it had been said in earlier speeches and announcements on 'liberalisation'of the economy that government help and fund would be available only for ‘capable Malays’, which would invariably mean Malays who had made it ‘big’ in the Malaysian corporate scene. Is this a fair assumption and inference on my part?

In the end, what matters for our economic growth is good leadership, good intention, good plan to realize it; honest management and implementation, the indomitable will to translate vision into reality, lots of scruples and compassion for national interests, of all citizens regardless of race and religion. Without these vital ingredients, any plan whatsoever is doomed to failure, in the end accumulating a host of bitter baggage, far from achieving better economy and better life for all.Without clear vision and principles, backed by resolve and scruples to see them through,any 'plan' would degenerate into just a question of medling and tinkering around with existing institutions, and mudling through under the guise of 'consulting and listening' to the people. It is clear goal,solid planning, political will and moral integrity that determine in the end whether the NEM is a good model, meddle or muddle. Shortcomings notwithstanding, I wish the NEM every success in realizing its various noble intentions enunciated therein.

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