GTP and ETP 2013 Report: Looking beyond numbers

With the raging debate on hudud taking centre stage and the disappearance of the unfortunate MH370 refusing to be relegated to the second place, discussion on the annual report of the GTP and ETP 2013, in the public sphere, were understandably muted.

The mainstream media were admittedly abuzzed albeit for a few days. The premier was elated as he stood grinning, reading some arguably "impressive" numbers.

Despite global economic challenges and regional volatilities, achieving 104% of overall goals in the GTP are, however, admirable. Notably too in 2013 alone, the ETP contributed RM7.4 billion to the Gross National Income (GNI), creating 29,373 new employment opportunities and driving RM8 billion worth of investments.

If only it could be audited and showcased for all to peruse. Or perhaps to be verified by the federal opposition parliamentarians who are always keen to pick holes, much within their constitutional roles, to check and balance the federal government.

Economic growth has been steady at about 5.1% per annum for the last three years with both incomes and employment reported to have risen, while the budget deficit has also ostensibly been under control.

With all those inspiring numbers, little wonder that the prime minister pronounced that we are well on our way to becoming a high-income nation by 2020.

This writer is not about to end the frenzy with these good news, a luxury Malaysians have longed been denied of. Before we get overawed by the numbers, let us put things to perspective.

But let us have a closer look at the GTP and ETP numbers first. Not all are well. Poor scores of four NKEAs were noted. They have failed their KPIs as noted by RHB Research Institute.

Most significantly, investments were down by 75% year-on-year to RM8 billion as compared to RM32.1 billion in 2012 and RM179.2 in 2011. Research houses are already alluding to concern of our attractiveness as an investment destination.

ETP projects have been essentially infrastructural in nature but these are unsustainable on a longer timeline. This could be a boost for the economy but its contribution to growth would be gone once projects are completed.

Moving forward, the lack of investment in the high-technology manufacturing sectors is worrying. But attracting more interest is handicapped by availability of skilled labour and the correct investment policy as the case of the recent uncertainties in the National Automotive Policy.

With that scenario looking most plausible, the trajectory to a "high-income nation" would not be that easy after all.

Let us truly understand the notion of "high-income nation" and why are stuck in the "middle-income trap".

Simply put, a country moves from a low-income to middle-income status, thanks to rapid economic growth, but subsequently fails to get to the high-income status and got stuck in a "middle-income trap".

Malaysia is one example. The middle-income trap is a development stage that characterises countries that are squeezed in between low-wage producers and highly skilled and fast-moving innovators. Malaysia experiences a structural transformation from a low-income agricultural-based nation to a middle-income manufacturing-based economy.

However, in an intensely competitive global economy, Malaysia, like many other middle-income economies, is sandwiched between low-waged economies on one hand and the more advanced and innovative economies on the other.

Many middle-income countries typically commit two common mistakes. One is hanging on to past successful policies or exiting prematurely from the industries, which could have very well served them into higher-value added economy. Malaysia is guilty of both.

The inability to extricate herself from the ethnic-based affirmative action of the "over-used" New Economic Policy and the inadvertent premature deindustrialisation were perennial problems worthy of intense discourse.

So putting to perspective again, what do all these good numbers hold for us?
Are we on a sure trajectory, ceteris paribus, which will propel us into a high-income economy come 2020?

The status of a high-income nation by 2020 with a gross national income (GNI) of over RM1.7 trillion and a GNI per capita of RM48,000 (USD15,000) per year in 2020, is well within reach.

Already, we have achieved a GNI per capita of RM22,815 (USD7,059) in 2009 and RM32,556 (USD10,060) in 2013. The target of RM48,000 (USD15,000) is achievable barring any calamity.

But a developed nation is not about meeting the income numbers set by the World Bank. More importantly, it is about achieving quality of life, equitable and sustainable "steady-state" growth for the longer term. Needless to say on the crtical need for rule of law, a vibrant democracy, quality education, and good governance as to plug leakages, corruption and rent-seeking activities.

This brings us to the central issue of GNI per capita versus household income per capita. While the index of GNI per capita has been highlighted, this is neither similar nor are they measurements of the same thing.

While GNI per capita is predicted to double from RM23,700 per year in 2009 to the targeted RM48,000 per year in 2020, could household per capita approximately experience a two-fold increase in income?

Very unfortunately, from the Household Income and Basic Amenities Survey Report 2009 by the Department of Statistics, while household member earned RM11,208 (RM981 per month), the GNI per capita income level was showing a figure of RM23,700.

Hence the GNI per capita use in the target to achieve the high-income economy bears little semblance of the realities of the state of the rakyat-citizenry. There is an obvious disconnect between the two parametres. We are also reminded of transfer payment of RM2.9billion paid to over 4.8 million low-income households through the infamous BRIM2.0.

Achieving GNI per capita of US$15,000 or RM48,000 and heralding ourselves as a “High-Income Nation” is very misleading.

More specifically here, neither has the quality of life for the bottom 40% of the rakyat or citizenry improved, worse still, declined. Nor that the size of the middle class has become broader based and improving.

Given an inflationary pressure consequent to the subsidy rationalisation and with the impending Goods and Services Tax or the GST, the scenario could only get worse.

The entire taxation system warrants a total review, especially in respect of a tax on capital gains or some form of wealth tax as to make it genuinely progressive.

In the final analysis, while the numbers in the ETP and GTP annual report may look good, this writer will join the chorus of those clamouring for more serious structural reforms to be effected and institutionalised. We really could no longer afford to do more of the same!

As the saying goes, if you want to have what you never had, you have got to do what you have never done. – May 21, 2014.

* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.