Taking bigger than baby steps to transform the economy

Transforming the economy is no easy feat. This is something both sides of the divide have used in their speeches and policy statements. In any case, my article in March 2011 was about how the federal government’s Economic Transformation Programme (ETP) would sit vis-a-vis the Pakatan states’ plans, particularly in Selangor and Penang.

Taking bigger than baby steps to transform the economy

Centralised planning may have certain advantages, but serious engaging of sub-national players is vital to the efficacy of nationally initiated projects, especially when these players govern the most industrialised states in the country. The continued political divide sees the Pakatan Rakyat (Pakatan) states grouping their resources to construct viable economic programmes to attract foreign investments.

Penang Chief Minister Lim Guan Eng recently demanded that the Prime Minister Department’s Performance and Management & Delivery Unit (Pemandu) gives a formal presentation on its Economic Transformation Programme’s (ETP) Entry Point Projects (EPPs) as he claimed Penang has been largely excluded from the country’s primary document intended to transform Malaysia into a high-income economy. The national ambition is to raise the country’s per capita income to RM48,000 by 2020 from the 2009 level of RM23,700.

He also stated that the federal government had not announced any allocation to Penang under the 10th Malaysia Plan in terms of budget and projects. Pemandu immediately responded by issuing a statement detailing the areas in which Penang would benefit from the ETP, namely under 13 EPPs within the Electronics and Electrical (E&E) National Key Economic Area (NKEA). It also listed several EPPs that would fall under 11 NKEAs that would potentially be situated in Penang, although details of these were not highlighted.

Economic Transformation Programme (ETP)

What seems clear though is that while Pemandu and its alphabet soup of economic plans have identified in total 12 NKEAs to boost the country’s economy, the manner in which the projects are being executed is still largely centralised, with little to no consultation with governments of states that are said to gain from them. Presentations were given by the National Economic Advisory Council (NEAC) to all state governments, but this was only done once and the states’ participation has been minimal despite the 131 EPPs supposedly targeting all geographical areas in Malaysia equally.

In reality, it is difficult to examine the geographic distribution of the EPPs to determine if these are equally spread out across the 13 states in Malaysia. This is because their definitions are hardly clear, for example under the E&E NKEA, one EPP is to: “Grow Radio Frequency Identification (RFID)” and its target is to “bring in RM1.45bil in Gross National Income by 2020 to create 3,948 new jobs as a result”. This does not provide the reader with the information on how the RFID industry will grow exactly. All the EPP details in the extremely large and heavy ETP book are similarly sketchy at best; and this is not helped by the statement that 92% of these projects are expected to be funded by the private sector. The “project updates” within this NKEA on the ETP website reveals no extra information either.

Perhaps it is unfair to assume that details do not exist. Perhaps it is only that they will be divulged when the time is right, to the right audiences. For example, the Mass Rail Transit (MRT) project slated to cost RM36.6bil has its first route from Sungai Buloh to Kajang on public display between February and May 2011. In this instance, public feedback was sought and explicit instructions were given on how people could provide appropriate suggestions. Hence, in line with the example provided above, it is possible the officer-in-charge of the E&E EPP has been hard at work interacting with manufacturing companies to convince them to increase RFID research and production – and will announce this through a press statement soon after. If that is indeed the case, then we don’t mind waiting.

Greater Kuala Lumpur/Klang Valley

Selangor is the only Pakatan-led state that has the privilege of being included directly in the ETP by virtue of its location, namely in the Greater Kuala Lumpur/Klang Valley NKEA. It is also of interest that the “Klang Valley” term was not originally part of the equation, but included after discontent from some quarters was expressed that a large part of “Greater Kuala Lumpur” in fact involved Selangor.

Terminology aside, the Selangor government is represented at its steering committee, although it would be more appropriate for it to have a larger role, since the NKEA covers a significant proportion of Selangor state. Recognition of the important role of Selangor as contributor to the region’s economic development could appropriately have been done via a joint chairmanship of the steering committee. Projects involving Selangor in this ETP include the MRT lines which lie directly across the state in major towns and cities; the River of Life project to clean up the Klang River although it is understood the focus will be in the Kuala Lumpur portions; and the massive urban development of existing land belonging to the Rubber Research Institute (RRI). These will be mega-projects that require civil society monitoring especially in financial transparency and public accountability.

Since no other Pakatan states are exclusively “given” an ETP of their own, suffice it to note that economic plans for these states are to be subsumed under the gamut of the other 11 NKEAs, stretched across the various EPPs. It is necessary to also highlight that all state governments, not just the Pakatan-led ones, ought to be carefully analysing the impact of the ETP on their state economies as well. It is a well-known fact that the oil-producing states of Sabah, Sarawak, Kelantan and Terengganu are also the poorest in Malaysia. All states, whether Barisan or Pakatan-led, should study how they benefit from federal initiatives.

Meaningful contributions

Pemandu’s response to Penang cited efforts by Pensonic Berhad to expand and establish its electrical home appliance manufacturing hub and international distribution network. This is a positive announcement of course, although it would make more sense for local manufacturers to deal directly with existing state-owned enterprises whose job is to encourage investments, such as Invest Penang or the Penang Development Corporation. Similarly, other state governments have their own units which are better-placed in identifying local problems and conditions, and in working out network and logistical, administrative, registration and other bureaucratic chinks. For example, Selangor State Investment Corporation (SSIC) and Kedah Investment Centre (KIC) are suitable points of contact, as well as the respective state branches of the Malaysian Industrial Development Authority (MIDA).

Secondly, Penang should not have needed to wait for an official press release by Pemandu to be informed of the potential impacts the ETP would have on the state. If meaningful contributions and consultation are to take place, this should involve a long-term and full-time dedicated team of individuals working closely within each state in producing more effective outputs from all possible EPPs.

It is appreciated that much is taking place with the ETP. In fact, it is encouraging to know that some economic planning is in fact taking place, and urgently at that. However, going about it in the style typical of Malaysia – top-down approaches with speedy approvals for mega-project consultants – creates a fertile ground for authoritarian processes that can breed the same misuse of funds the public has been critical of for years. The same mistakes of cronyism and nepotism must be avoided at all costs.

Finally, for economic transformation to truly take place within the Pakatan states, new and fresh ideas must emerge from within. Whilst the proposals by Pemandu are welcome, the Pakatan states have been progressively working their common ground to present a different framework of the economy altogether. As I have written about before, the states had their second Menteri Besar/Chief Minister Summit in November 2010 which ended with the Shah Alam Resolution. The Resolution listed common positions and proposals to be adopted, one of which is for each state to introduce one or two large projects and collate them amongst all the Pakatan states to form a fund (ideally internationally structured) that would attract foreign investment. The Pakatan states’ strengths would lie in their standards of access to information, transparency, accountability, progress towards open tenders, and so on.

The difficult task of governance continued with another Menteri Besar/Chief Minister Summit that took place in February 2011, at which more rigorous discussions were planned. This month marks Pakatan’s three-year anniversary in the Penang, Selangor and Kedah state governments. As such, Pakatan is organising its Economic Convention which will outline key principles and policies at the national level. The Penang Blueprint contains outlines of its vision for the state; and it is expected that Selangor will unveil the same at its third anniversary. These policy plans and documents are added on to Pakatan’s Orange Book that forms the basis of its socio-economic philosophy launched in December 2010, which in turn is based on the Pakatan Common Policy Platform.

Now as global debate is leaning towards the need for a new world order following events in Tunisia, Egypt and the Middle East, Malaysians need an alternative approach to its economy and society. Large infrastructure projects for generating growth and development are acceptable insofar as they are accompanied by an equivalence in human resources, skills and independent institutions, a fair, needs-based and merit-based system (as opposed to race-based), transparency, accountability and genuine co-operation between the federal government and all states. We are only now treading baby steps towards economic transformation for the country as a whole.

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