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Thread: Activism REFSA: A Critique of the ETP

  1. #1
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    Oct 2008

    Activism REFSA: A Critique of the ETP

    The Edge: Evaluating the ETP

    By Ong Kian Ming

    Economic Transformation Programme (ETP) was launched with much fanfare on Sept 21 last year. The ETP report outlined in very specific terms the roadmap by which we would achieve the status of a high-income nation, with a gross national income (GNI) per capita of RM48,000 by 2020.

    Its focus was on the 131 Entry Point Projects (EPPs) and 60 business opportunities identified in the 12 National Key Economic Areas (NKEA). This was the product of eight weeks' worth of discussion and brainstorming involving 500 experts from the public and private sectors. One year later, how can we objectively evaluate the performance of the ETP? An objective perspective is needed since there are ample ways in which one can unfairly criticise the performance of the ETP.

    For example, one can point to the exorbitant fees running into tens of millions of ringgit paid to consultants to set up Pemandu, the government agency in charge of driving the ETP, and to run the NKEA labs. These should be considered sunk costs and could potentially be paid back many times over if the ETP is indeed successful in significantly increasing economic activity in the country.

    One can also easily criticise the charismatic CEO of Pemandu. Datuk Seri Idris Jala, as a good salesman who is able to cover up the lack of substance in the ETP by hyping up the many EPPs during each of the seven ETP updates. But this assumes the "hollowness" of these EPPs without going through the due diligence of examining their individual economic potential. Along the same lines would be the criticism that these projects would have been carned out regardless of the ETP.

    This ignores the implicit role of Pemandu as coordinators between the private and public sectors to clear away unnecessary red tape so that some of these projects can be expedited. In addition, the very public nature of a project being named as an EPP may also help focus the energies and budgetary commitments of the stakeholders (the government, government-linked companies (GLCs) and the private sector) to drive these projects through to completion in a timely fashion.

    Finally, one can also get overly obsessed with small, individual projects such as which comprise only a small fraction (in GNI contribution as well as investment) of the overall ETP.

    A more objective way would be to evaluate the ETP on its own terms by looking at the objectives and plans outlined in the ETP roadmap document. By doing this, one can examine the ETP using a framework which the ETP team, the government and the interested public can refer to in the context of having a constructive debate. If the ETP roadmap promised certain transformational EPPs in certain NKEAs, why haven't these been announced yet?

    What is the distribution of the EPPs announced thus far among the 12 NKEAs? What is the breakdown between the necessarily public and private investment outlays? In this short piece, I can only highlight a limited number of points using this evaluation criterion. The results after the seven ETP updates have certainly been impressive, at least on paper.

    Some 84% of the 87 EPPs announced in the first six updates are already under way in various stages. A total of 95 EPPs with a planned investment ofRMl7l billion with an estimated GNI contribution of RM230 billion and over 350,000 new jobs by 2020 have been announced. The planned investment, if it continues on the same trajectory path, will mean that the investment target of RM1.4 trillion by 2020 will be easily exceeded.

    But when one examines the distribution of these investments, it becomes clear that a handful of projects contribute to the bulk of the headline figures. The RM60 billion Refinery and Petroleum Integrated Development (Rapid) project is an ambitious undertaking funded by Petroliam Nasional Bhd (Petronas) with the aim of significantly expanding the country's refining capacity and increasing the range and value of petrochemical products.

    The RM40 billion MRT project under the Greater KL NKEA is the second largest EPP by value. Both these EPPs combine to contribute almost 60% of the announced RM171 billion in investments. By this measure, the split of a 60%, 32% and 8% investment ratio between the private sector, the GLCs and the government outlined in the ETP roadmap seems difficult to achieve.

    Of course, if the number of EPPs is used as a measure, rather than investment value, private sector investment does reach the 60% mark although the number of government-initiated EPPs is closer to 20% of the total rather than the desired 8%.

    Another point worth highlighting is that the EPPs for the oil, gas and energy sector seem to dominate the other NKEAs when measured by value. The 17 EPPs under this NKEA make up more than 50% of total EPP investments (by value) announced thus far. Seven out of the top 10 investments all costing RM3 billion and above are oil, gas and energy EPPs.
    The ETP roadmap anticipated the highest incremental GNI contribution from this NKFA. This economic sector is expected to make up 19% of total GNI in 2020.

    The contracts given out to private companies to develop marginal oilfields will not only give domestic production a much needed boost but more importantly, develop the capacity of the local service providers to compete internationally. There is certainly a lot of buzz and excitement among local players in this sector of the economy.

    But it does raise concerns of being overly dependent on oil and gas to drive future economic growth, especially with the uncertainty over oil prices.

    What is more worrying is the fact that there have been zero EPPs announced under the Financial Services NKEA which is projected to be the second largest economic contributor in 2020. This could be because many of the initiatives under this NKEA require the implementation of what Pemandu calls key police "enablers" before the necessary investment can come in.

    Here, Pemandu may be teartul of stepping on the two existing regulators, Bank Negara Malaysia and the Securities Commission, which already have developed comprehensive plans to slowly but surely expand this sector of the economy.

    Of greater concern is how the proposed Kuala Lumpur International Financial District (KLIFD) by 1MDB fits into the ETP given that it was not featured in the roadmap but was later named as an EPP under the Greater Kiang Valley/KL NKEA.

    While not directly featured in the roadmap, the incorporation of 37 policies identified in the New Economic Model (NEM) clustered under six Strategic Reform Initiatives (SRI) into the overall ETP seems to make sense. Many of these policies can be likened to the "enablers" identified in the ETP.

    These structural changes will spur the growth of the already and yet to be announced EPPs under each of the NKEAs. However, because of the longer time frame and higher political hurdles involved, it would be difficult to expect Pemandu to give similar ETP updates with regard to the SRI policies (reducing subsidies and introducing the goods and services tax (GST) under the Public Finance SRI, for example).

    Even if one does not think much of the ETP, it cannot be denied that it has generated a positive buzz among potential foreign investors that the government is serious about tackling existing barriers to economic growth in the country.

    Many of them are adopting a wait-and-see attitude to see if the much needed reforms can be implemented, as are many domestic companies with investment funds available. Only if Pemandu can keep up this momentum can the big ship that is the Malaysian bureaucracy and the economy be slowly steered towards the path of a high- income nation. For now, it's the best hope we have.

    Ong Kian Ming holds a PhD in political science from Duke University. He is currently pioneering a Masters in Public Policy (MPP) programme at UCSI University. He intends to use Pemandu as a case story in the MPP

  2. #2
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    Oct 2008

    Activism REFSA: A Critique of the ETP

    Focus Paper

    Critique of the ETP (Part 1): Let’s evaluate PEMANDU on its DEEDS

    By limei | Published: January 19, 2012

    Is PEMANDU taking Malaysians on a joyride, or can it really steer our country to high-income status by 2020?

    Its Economic Transformation Programme (ETP) is ambitious – promising to double gross national income (GNI) per capita to RM48,000 by 2020 from RM23,700 in 2009.

    Such an expansive plan has of course attracted detractors, but supporters of the ETP have voiced rebuttals. These are, however, squabbles over spilt milk.

    Much of the criticism to-date has been carping about the slick façade and expensive costs at PEMANDU; or questioning the viability of its lofty targets. These ultimately boil down to questioning PEMANDU’s existence.

    REFSA decided that it is more constructive to hop along with the ride. PEMANDU is here to stay and we shall measure PEMANDU and the ETP on its own terms by looking at its DEEDS. Rather than questioning its ambitious targets, we shall analyse how well it is measuring up to those aspirations.

    The first D of DEEDS is for Data. Mark the date – 25 Jan 2012 – when we declare “It does not compute!”

    Read our Focus Paper here to find out what the rest of DEEDS stand for.
    .................................................. ..........

    A Critique of the ETP (Part 2): We won’t really be twice as rich in 2020

    The first ‘D’ in DEEDS is for data. It is also the score PEMANDU gets for figures that “do not compute”.

    Behind the dazzling promises and public relations rhetoric surrounding the Economic Transformation Plan (ETP) is data that is dodgy. Some key numbers are not announced, and where numbers were revealed, they do not tally.

    REFSA is perplexed at the inability of the highly-paid team at PEMANDU and its costly consultants to get basic mathematics right.

    Can we trust a “roadmap” to economic transformation that is marked by inconsistent data and vague directions?

    Read our Focus Paper here on why we give PEMANDU and the ETP a ‘D’ for data transparency, and how its target to double gross national income by 2020 is neither real not transformational.


    ETP Part 3 (iii) A critique: Doubtful EPPs; doubtful achievements and due diligence
    By limei | Published: February 10, 2012

    ‘Dud’, ‘doubts’ and ‘debt’
    are three words written all over at least two Entry Point Projects (EPPs), punctuated only by question marks.
    The investment cost for the Karambunai Integrated Resort in Sabah more than tripled from RM3 billion to nearly RM10 billion in 6 short months. At this price, it needs 2.8 million visitors per year to break even. That is more than the total number of travellers arriving at Kota Kinabalu airport in a year!

    Tanjong Agas has REFSA aghast. Massive investment and construction is to be poured into this fishing village to build an oil and gas hub redolent of the success of Kertih and Gebeng. But will it turn out to be redundant? Kertih and Gebeng are the focus areas for oil, gas and petrochemical clusters in the Eastern Corridor Economic Region (ECER); Tanjong Agas, located in Pekan, the parliamentary constituency of prime minister Najib, is not.

    Together, these two possible ‘dud’ projects alone account for 7% of total ETP investments so far. And given the weak financial stature of their private sector developers, will taxpayers end up saddled with the bill? Already, the government’s proposed investment in Karambunai has soared 6-fold from RM100 million to RM600 million.

    Read Part 3(iii) of our Critique of the ETP on why PEMANDU rates a ‘D’ for Execution. The selection of such possible ‘dud’ projects – projects with very little hope of success – as EPPs raises serious doubs about the due diligence process at PEMANDU.


  3. #3
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    Oct 2008
    ETP: Part 4 – Private enterprises are rejecting the ETP — Ong Kian Ming and Teh Chi-Chang

    February 15, 2012

    FEB 15 — The very basis of the ETP is in jeopardy. A key foundation of the ETP is that the private sector is to lead the massive RM1.4 trillion of investments needed to catapult Malaysia to high-income status by 2020. But the 35 per cent private sector share of ETP investments to date is far below target. The RM114 billion investments by government and GLCs are nearly double the RM62 billion invested by the private sector.

    PEMANDU obfuscating again

    PEMANDU responds that private sector investments are closer to the targeted 60 per cent share if big-ticket public sector projects like the MRT are excluded. This is intellectually dishonest. The ETP Roadmap Report includes such projects in its desired investment mix. There is no justification to exclude them. It is akin to giving a recipe for a rich chocolate cake and then saying it is not fattening if you exclude the calories from the butter.

    Is PEMANDU attempting to cover up tepid private sector response?

    We would expect the big-ticket, long-gestation infrastructure projects to be prioritised in the early days of the ETP. However, PEMANDU has chosen to obfuscate rather than clarify. Is it because the gap between the desired 60 per cent private sector target and the current 30 per cent is unlikely to be bridged?

    Grade ‘E’ for developing private sector enterprise

    PEMANDU includes big-ticket projects when it trumpets its headline numbers, and excludes them when inconvenient. If private sector investment is lagging, hiding behind different sets of data will not take us to high-income status. PEMANDU must take the bull by the horns. Explaining the issues and the remedial measures being taken is crucial if economic transformation is to be achieved.

    Has the ETP fostered private enterprise?

    A key foundation of the ETP1 is that the private sector is to lead the massive amounts of investments needed to catapult Malaysia to high-income status by 2020. The ETP Roadmap Report says:

    “the projects and opportunities identified will be mainly funded from private sources. The Government’s role will be that of an active facilitator of the private sector through resource and policy support, rather than the principal driver, as it has been in the past.”

    This is consistent with the “government knows best era is over” ethos of the government’s other economic plans including the 10th Malaysia Plan and the New Economic Model.

    The ETP says RM1.4 trillion of investment is required to take Malaysia to high-income status by 2020. Of this, 92 per cent is to come from the private sector with the balance 8 per cent from the public sector (the government).

    Note that the ETP considers government-linked companies (GLCs) as “private sector” and includes them in the 92 per cent private sector total. We take issue with PEMANDU on that definition, which we delve into in Appendix 1. We consider GLCs as a separate class, and the desired split is 60:32:8 - 60 per cent from the “true” private sector, 32 per cent from GLCs and 8 per cent from the government.

    Attracting private sector, non-GLC investments is crucial to the transformation objective of making the private sector the main driver of economic growth. The very basis of the ETP is in jeopardy if private sector investment is not forthcoming.

    In this paper we focus on Enterprise — the second “E” in the DEEDs framework with which we are evaluating PEMANDU and the ETP. How effective has PEMANDU been in steering the ETP towards this paramount goal of restoring the private sector as the engine of growth for Malaysia?

    Based on number of projects, the ratio of private:GLCublic projects of the 113 EPPs announced so far is 64:12:24:

    • The 64 per cent private sector participation is close to the 60 per cent target;

    • GLCs at 12 per cent are far behind the 32 per cent target;

    • Government at 24 per cent is far ahead of the 8 per cent public sector target.

    However, the private sector projects are of relatively small value, averaging just RM864 million per project. This would be even smaller at RM704 million per project if we exclude the two doubtful multi-billion projects we covered last week in Part 3 (iii): Doubtful EPPs; doubtful projects and due diligence — the Karambunai Integrated Resort and the Tanjong Agas petrochemical park.

    The government projects are far larger, averaging out at RM1,630 million per project. The GLC ones are massive, averaging RM4,957 million each — nearly RM5 billion per project. In fact, GLC and government investments total RM114 billion — nearly double the RM62 billion from the private sector.

    Based on investment values of the EPPs, the private:GLC public projects split is 35:40:256.

    • Private sector investments at 35 per cent of the total value are far below the 60 per cent desired;

    • GLC investments at 40 per cent are above the 32 per cent target;

    • The government investment share at 25 per cent is more than triple the desired 8 per cent. In fact, it will be even higher if the increased cost of the MRT is used. This 25 per cent share is based on the original RM37 billion budget for the MRT. The estimated cost since then has ballooned.

    PEMANDU is trying to have its cake and eat it

    Opposition Leader Datuk Seri Anwar Ibrahim observed that, “a high proportion of the EPPs (upon which the success of the ETP hinges on) are nothing more than large-scale infrastructure projects that will consume a large amount of public money either directly from the public coffers or through funding arrangements with GLCs / GLICs”.

    PEMANDU’s response:

    • It acknowledged that about RM67 billion or 39 per cent of the total investment up to November 2011 was contributed by GLCs. However, it pointed out that the percentage falls to 6 per cent if the RM60 billion RAPID project by Petronas is excluded.

    • Similarly, it said the private sector public sector ratio (including GLC investment) stands at 75:25. But it also suggested that if GLC investments are excluded, the private to public investment ratio is 60:408.

    This is not an isolated example. In response to other similar criticisms, PEMANDU has also trotted out numbers that exclude the MRT and RAPID projects which then takes the private / public investment ratio much closer to the desired 92:8 ratio.

    This is yet another case of PEMANDU obfuscation. It is disingenuous to suggest that the private/public investment ratio would be closer to the ETP targets if certain investments are excluded. The ETP is a holistic plan which includes desired investment targets from the private sector, GLCs and the public sector.

    There is no justification for excluding particular projects such as the MRT from the investment ratio calculations. The ETP Roadmap Report already includes the MRT project in its targeted 60:32:8 private:GLC public investment mix. There is no reason why separate calculations which exclude the MRT project should be highlighted.

    On the one hand, in its updates, PEMANDU trumpets the massive amounts of investments and its excellent progress towards its ambitious target. This large total rightly includes investments from all parties — the private sector, GLCs and the public sector.

    On the other hand, when it is pointed out that private sector participation is lagging, PEMANDU trots out statistics which exclude certain projects. This is intellectually dishonest.

    PEMANDU can’t have its cake and eat it:

    • If it wishes to include the mega-billion GLC and government projects towards its total RM1.4 trillion target, then it has to accept the ensuing ratios which are heavily skewed towards GLC/ public sector investments.

    • If it wishes to exclude GLC/public sector investments in its ratio calculations, then it must also exclude them from its headline investment numbers — which would then be far behind schedule.

    Going back to the cake analogy, PEMANDU’s response is akin to saying this delicious chocolate cake is not fattening if you exclude the calories from the butter and icing. The cake has to be eaten in its entirety. You can’t take out the butter!

    Is PEMANDU attempting to cover up tepid private sector response?

    There really should be no problem with public sector investment being heavier in the early stages of the ETP. The targeted 60:32:8 private:GLC public ratio is a long-term one over the course of the ETP until 2020.

    In fact, we would expect government to feature more prominently in the early days. The government would naturally be expected to pursue very big-ticket, long-gestation, infrastructure projects like the MRT. So, it would actually be sensible for PEMANDU to prioritise these over smaller-ticket, shorter-time frame private sector projects.

    However, instead of taking this line, PEMANDU has chosen to obfuscate and cherry-pick. It includes GLC and government projects when it suits its case, and excludes them when it does not.

    Is it because there is no visibility in the pipeline for private sector EPPs? Is it because it is unlikely that the gap between the desired 60 per cent private sector investment ratio and the current 35 per cent will be closed?

    In fact, because the private sector is already lagging, the ratio of private sector investment must rise to 64 per cent from now to 2020 in order to meet the desired target. That is a massive increase from the 35 per cent today. Also, because private sector projects will be smaller than the massive multi-billion ringgit GLC and government investments such as the MRT and RAPID, PEMANDU will have to foster a large number of private sector EPPs.

    Can PEMANDU do so? Only time will tell. We shall be monitoring.

    In the meantime, PEMANDU gets an “E” for developing private sector Enterprise. While a fair number of private sector-driven EPPs have been named, the ETP is still too focused on big ticket government-linked projects in order to drive the headline investment, GNI contribution and job numbers.

    What can PEMANDU do?

    PEMANDU must take the bull by horns and address the root causes of why the private sector does not have sufficient confidence in the long-term potential of the country to invest large amounts of capital in long-term projects in Malaysia. To do this, PEMANDU should:

    1. Stick to a consistent data set that includes all EPPs in all its statistics;
    2. Explain the issues and the remedial measures being taken where there are deviations from the targets; and

    3. Stop obfuscating by cherry-picking and trotting out statistics that exclude certain projects. This is unproductive and intellectually dishonest.
    If private sector investment is lagging, hiding behind different sets of data will not take us to high-income status. PEMANDU must demonstrate that it is able to mobilise the private sector to drive economic growth through the EPPs.

    A related concern is that a small number of EPPs, mostly in the Oil, Gas and Energy NKEA, constitute the bulk of investment numbers.

    We will discuss this in detail in Part 5 next week, when we evaluate the Distribution of EPPs across the NKEAs, the second ‘D’ in our “DEEDS” framework.

    Appendix 1: GLCs are NOT similar to private sector players

    PEMANDU believes government-linked companies (GLCs) should be considered as being similar to other players in the private sector:

    “The reality is that GLCs must be considered as part of the private sector as they compete on a commercial basis in their respective sectors, and are accountable for their annual profit and loss performance.”

    But this statement flies in the face of the reality that many GLCs can run at a loss over long periods of time because there is the underlying assumption that, at the end of the day, the government will bail them out if necessary. Malaysian Airlines, for example, is a GLC that has to compete against other airlines in the international and domestic markets but there is little chance that it will be allowed to go bust.

    Also, some of these GLCs have government-granted monopolies or legacy economies of scale. For example, Telekom is dominant in the fixed line aspect of telecommunications, Tenaga has a monopoly on electricity transmission and Petronas is charged with stewarding our country’s oil wealth.

    We do not deny that GLC-led EPPs can make important economic contributions to the country. But counting EPPs associated with such GLCs as private sector initiatives overstates the private sector role. It makes private sector participation appear larger than it really is.

    Notable examples of EPPs helmed by monopolistic GLCs include:

    • The massive RM60 billion RAPID project by Petronas;
    • Other Petronas EPPs including efforts to rejuvenate existing fields through Enhanced Oil Recovery (EOR) under EPP1, develop small fields through innovative solutions under EPP2 and intensify exploration activities under EPP313;
    • RM4 billion investment by Tenaga to build additional and upgrade existing infrastructure under the Oil, Gas and Energy NKEA;
    • RM486 million investment by Malaysian Airports to transform KLIA into a retail hub under the Wholesale and Retail NKEA;
    • RM418 million investment led by Telekom Malaysia to lay the Cahaya Malaysia Cable System linking Malaysia to Japan and Hong Kong.

    About this series

    Critics of PEMANDU and the ETP thus far have tended to focus on the expensive costs incurred by PEMANDU and its consultants, accusations of style prevailing over substance, the execution of specific projects and its apparently lofty, unrealistic targets.

    We think these issues can be further debated, but these questions ultimately boil down to PEMANDU’s raison d’être. PEMANDU is already a fait accompli. Debating its existence serves no useful purpose at this point. Instead, we evaluate PEMANDU and the ETP on its own terms by looking at the goals, plans and targets outlined in the ETP Roadmap document. Doing so facilitates constructive debate as it uses the same framework which PEMANDU has chosen to work within.

    In that vein, and in keeping with the spirit of the alphabet soup of NKEAs, NKRAs, SRIs, EPPs, GNI surrounding the entire GTP, we evaluate PEMANDU and the ETP on its DEEDS:

    1. Data transparency — the ease with which an independent analyst can evaluate the figures relevant to the ETP and its targets;
    2. Execution — the progress, or lack thereof, of announced EPPs (Entry Point Projects);
    3. Enterprise — whether the target of stimulating private investment is being achieved. The ETP aims for a 92:8 split between private and public investments;
    4. Distribution — the distribution of EPPs across the NKEAs (National Key Economic Areas), which shows whether a healthy balance of projects is being maintained; and
    5. Socio-economic impact — an evaluation of the main beneficiaries of the economic activities generated by the EPPs. — REFSA (Research for Social Advancement)

    * Dr Ong Kian Ming and Teh Chi-Chang wrote this analysis for REFSA.
    * This is the personal opinion of the writer or publication. The Malaysian Insider does not endorse the view unless specified.

  4. #4
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    Oct 2008

    Economics: Verify, verify, verify - ong kian ming

    Not for nothing do they describe economics as the science and art of bull-shit!

    Verify, verify, verify — Ong Kian Ming

    May 24, 2012

    MAY 24 — I love this quote from one of the basic rules of journalism — “If your mother says she loves you, check it out”. It’s a warning to journalists to develop a healthy dose of scepticism and to always verify facts even though it’s from a supposedly trustworthy source. I’m not a journalist but I’ve developed my own sense of scepticism after being exposed to academics in the United States, most of whom will jump at every opportunity to dismantle the supposed “proof” or “evidence” behind any new theory. It is perhaps not surprising that we in Malaysia have not developed the same healthy dose of scepticism when presented with a piece of information since we are taught from very young not to question authority figures. But when we are bothered enough to be healthily sceptical and make the extra effort to verify certain facts and figures, the results can be quite enlightening.

    Take, for example, the Economic Transformation Programme’s (ETP) Annual Report, which was released in April 2012. According to Exhibit C of this report (pg., the nominal Gross National Income in 2011 of RM830 billion surpassed its target of RM797 billion by RM33 billion or 4.1 per cent. In the same exhibit, nominal private investment in 2011 of RM94 billion was shown to have surpassed its target of RM83 billion by RM11 billion or 13.3 per cent. These figures together with other impressive results from the 12 NKEAs led many analysts to praise the ability of the ETP to over-deliver on its targets.

    But surprisingly, no one bothered to find out how the GNI and private investment targets were calculated in the first place, especially since the methodology of calculating these projected targets were not revealed in the ETP Annual Report (nor were they revealed in the ETP Roadmap Report which was released in October 2010). If one had bothered to do a bit of research, one would have realised that the RM797 billion nominal GNI target for 2011 seemed a bit low. After all, according to the Ministry of Finance’s Economic Report 2010/2011, which was published together with the 2011 Budget, the projected GNI in 2011 was RM811 billion. This was updated to RM820 billion in the Economic Report 2011/2012, published together with the 2012 Budget.

    Some simple maths would have shown that the RM797 billion is even lower than what the target would be using PEMANDU’s target of a 6 per cent real growth rate and a 2.8 per cent inflation rate. Since nominal GNI was RM739 billion in 2010, a nominal growth rate of 8.8 per cent would give us a target of RM804 billion, not RM797 billion (try it out for yourself, if you don’t believe me). Only with a nominal growth rate of 7.8 per cent, which is far lower than what the Ministry of Finance was projecting in 2010 as well as in 2011, would one arrive at the RM797 billion.

    In addition, a little bit of triangulation would have allowed us to see that the “achievement” of surpassing the nominal GNI target by 4 per cent is not a great accomplishment given that the real GDP growth rate of 5.1 per cent was at the bottom end of 5 per cent to 6 per cent real GDP growth rate projected by MoF in the Economic Report 2010/2011 and the 5 per cent to 5.5 per cent real GDP growth rate projection in the Economic Report 2010/2011. In fact, real GNI of RM540.9 billion was actually lower than the RM546 billion projected in the Economic Report 2010/2011 and the RM545.5 billion projected in the Economic Report 2011/2012. One’s suspicion would also have been raised by the fact that the real GDP growth rate of 5.1 per cent was shown in Exhibit 3 even though the economic output targets are expressed in GNI terms. Might it have something to do with the fact that real GNI growth was just 4.7 per cent in 2011, far below the 6 per cent real growth target set by the ETP?

    What about the RM83 billion private investment target? I found problems with this figure too. In the MoF’s Economic Report 2010/2011, private investment was projected to be RM86 billion in 2011. This was raised to RM94 billion in the Economic Report 2011/2012. A private investment target of RM83 billion assumes an increase in private investment of a mere RM4.3 billion or a 5.5 per cent increase from RM78.7 billion in 2010, lower than the projected nominal GNI growth rate. It seems quite unrealistic to assume that private investment would grow at less than the overall growth rate given that most companies would want to investment in new equipment and infrastructure when the economic is growing. (Note that private investment here refers to gross fixed capital formation such as buying new plant equipment and transportation vehicles.) Furthermore, under the 10th Malaysia Plan, nominal private investment was projected to grow at 16.2 per cent (Appendix, Table 4, pg362) which would give a target of RM91.4 billion in 2011 rather than the RM83 billion shown in the ETP Annual Report. The private investment figures for 2011 were indeed impressive. It grew by 19.4 per cent in nominal terms and 14.4 per cent in real terms surpassing the 10th MP targets of 16.2 per cent and 12.8 per cent respectively. But it grew by only 3.2 per cent above the 10th MP nominal growth target and not by 13.3 per cent, using the RM83 billion target indicated in the ETP Annual Report.

    I must admit that I had help in making these calculations and clarifying some concepts. I emailed a few friends who were economists. I also emailed a Bank Negara representative when I spotted an error in their private investment figure for 2011 which was published in their Monthly Statistical Bulletin (they corrected it almost immediately). I emailed a director in the Economic Planning Unit (EPU) to ask about the private investment figures and targets in the 10th MP (he also responded almost immediately). Finally, I emailed two directors at PEMANDU to ask how they calculated their GNI and private investment targets. Sadly, almost two weeks later, I have yet to hear from them.

    Perhaps what surprised me most is that all of the analyst reports I read did not even question the GNI and private investment targets as reported by the ETP. All of them praised the ETP for overachieving their targets including the GNI and private investment targets. I expected more from experienced economists whom I assumed would be very familiar with economic data and forecasting. Perhaps they should also take heed of the same basic rule outlined at the start of this article and develop a healthy scepticism towards information that is presented to them?

    * This article first appeared The Edge Financial Daily on May 24, 2012.

    * Ong Kian Ming holds a PhD in political science from Duke University. He is a lecturer and political analyst at UCSI University. He can be reached at

  5. #5
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    Oct 2008
    REFSA Part 2: A Critique of the ETP. A lot of fudging with numbers.


  6. #6
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    Oct 2008
    Errors forced ETP impact revision, says Pemandu

    By Lee Wei Lian
    July 06, 2012

    KUALA LUMPUR, July 6 — The original gross national income (GNI) projections of Economic Transformation Programme (ETP) were slashed due to erroneous assumptions made during the initial estimates, said Pemandu today.
    This comes after the ETP Annual Report was criticised by opposition-linked think tank Research for Social Advancement (Refsa) for not providing sufficiently detailed explanations for the large reductions in GNI impact and job creation of ETP projects.

    Refsa said in a statement yesterday that, in the annual report, RM107.7 billion of gross national income (GNI) and 75,000 jobs equivalent to 45 per cent and 20 per cent of the respective original forecasts were “written off”, which they said raised questions about the level of due diligence exercised during the original forecasts.

    (Admin: This is a lot of bullshit! We paid millions to a bunch of monkeys masquerading as consultants to cook some up numbers just to make Najib look good.)
    Today, the government’s performance management unit said that the revision of the investment and job creation numbers is primarily due to changes in business plans over the next five years as well as shifts in the trade environment.
    It also said the GNI forecasts were affected by mistakes such as unrealistic growth rates, the conflation of GDP with GNI, and the use of revenue to denote GNI.
    “Being a relatively new concept, most corporations struggled with it,” said Pemandu, referring to the fact that the GNI forecasts are formulated together with input from companies involved in the ETP’s entry point projects (EPPs).

    Pemandu said that GNI is defined simply as income of Malaysians, and it is the nation’s net GDP after corporate and personal repatriations, giving a better measure of actual income.

    It said that during the original forecasts, errors included using revenue as GNI without stripping out cost, inaccurate projections due to unrealistic growth rates and assuming GDP equated to GNI without taking into account that some corporations such as subsidiaries of multi-nationals or companies in joint ventures with foreign companies, repatriate a substantial amount of their profits.

    “Similarly, in calculating job creation numbers, there have been exceptions and revisions,” said Pemandu.

    “For example, while we focus on new job creation, several projects involve the expansion of existing plants or production lines and the existing workforce was not discounted. This has since been corrected.”

    It added that in order to avoid “spurious conjecture”, it wanted to categorically state that the investment value of the MRT has not changed and once it is fully awarded the actual cost will then be announced.

    Pemandu said that the decision to release the amended figures was voluntary and where exceptions are discovered, the data is amended and made public.

    It also stressed that the ETP is a living document that undergoes changes to fit changing circumstances and that the NKEA (National Key Economic Area) teams and their counterparts in various ministries and agencies strive to be as dynamic as possible.

    “In some cases further refinement has resulted in greater GNI projection,” said Pemandu.

    “As an example, under the Healthcare NKEA a lab was run for the Medical Devices Business Opportunity which was then converted into seven new EPPs. Their combined GNI was appreciably higher than that of the original Business Opportunity.”

    The ETP is an initiative by the Najib administration to lift the country to high income status by 2020 partly by increasing GNI through new EPPs

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