GNI annual growth of 6% from now to 2020 resulting in income per capita of USD15,000 from a low USD6,700 that we have today.
FO Summit 2011 organised by ACCA that I attended recently was quite a good one although many of the presentations revolved around accounting profession, which are dry, even for an accountant like me. Nevertheless, it wasn't a wasted evening for I was delighted that at least one session touched a topic close to my heart: National Economic & Investment Outlook 2011/2012 with the implementation of the ETP (Economic Transformation Programme).
Earlier I had posted a few blogposts, for which, can be updated now based on the presentation at the CFO Summit 2011. Those earlier posts were:
1. Najib is not 'Bapa Slogan' after all
2. "Penjodohan Pekerjaan"
3. RMK10 RM230B By RM
4. NEM means?
2 senior offcials, En. N. Parameswaran and En. Christopher Tan, shared some statistics and salient points on the progress of Government's efforts via ETP. The former is the Senior Director for Services under Malaysian Industries Development Authority (MIDA) and the latter is the Director for Electrical & Electronics Division of PEMANDU. Information revealed suggest that progression is apparent but continuous efforts are still needed to achieve the objectives sought.
The ETP essential pillars are: (1) High Income; (2) Inclusiveness and (3) Sustainability. All 3 should work simultaneously in order for Malaysia to be a High Income Nation by 2020. This is on the back of Gross National Income (GNI) annual growth (CAGR - Cummulative Annual Growth Rate) of 6% from now to 2020 which will increase GNI from USD188 billion to USD523 billion in 2020 resulting in income per capita of USD15,000 from a low USD6,700 that we have today.
1. High Income - USD15,000 GNI per capita by 2020.
2. Inclusiveness - All races are given equitable opportunities.
3. Sustainability - Wealth for a long time.
Such an aspiration requires significant injection into the equation. I remember when I was studying economics, the Gross Domestic Product (GDP) is essentially the measure of output for a nation that is best described as Aggregate Demand. Aggregate Demand is a function of Consumption, Investments, Government Spending, Exports net of Taxes and Imports. The relevant variable in light of ETP would be Investments and Government Spending. It will be interesting to see how the Malaysian Government apply this. By right, if the neo-classical believes of Aggregate Demand is true, the nation should see prosperity by the end of the second decade of the millenium.
EPP is expected to create 3.3 million jobs in the 'mid - high' income bracket. This is a decent figure given that the Malaysian population is expected to grow by 4 million from 2011 to 2020.
To help achieve this High Income status, the Government is/will be injecting necessary investments into the economy. Whether or not the funding is public money or private, is besides the point. Bottom line is, there is/ought to be significant injection into the economy. 131 Entry Point Projects (EPP) have been introduced to fuel the development of 12 National Key Economic Areas (NKEA) as listed below:
2. Palm Oil
3. Business Services
7. Oil & Gas
12. Greater Kuala Lumpur (KL)
These 131 EPP is expected to create 3.3 million jobs in the 'mid - high' income bracket. This is a decent figure given that the Malaysian population is expected to grow by 4 million from 2011 to 2020. EPP will require high funding, in the region of RM444 billion. Government has committed to contribute 8% of that funding whereas the remaining 92% is urged to be contributed by the private sector with a split of 40:60 between Government Linked-Companies (GLC) and Non-GLCs with 73% from domestic direct investments and 27% from foreign direct investments.
All these targets are good to know but whether achieveable? only God knows. We, however, may not necessary have to wait for God's miracle. Efforts are being implemented as we speak and the results are positive. Quarter 1 of 2011 recorded GDP of 4.6%. This is lower than the 6% target. There is hope. The Government is predicting that 2011 will close with an average of 5% to 6%, a level which is on border line that needs to be monitored and maintained closely in the next decade if 2020 is to be a celebrated year. We have achieved an average of 6% - 7% in the past (1945 to 2008). So, now all we have to do is to extrapolate that efforts (in the past) into the future.
These 3 (NKEAs, SRIs and KPIs) will provide the key elements necessary for the ETP to progress, which are Focus, Competitiveness and Results
A group of 1,000 Chief Executive Officers (CEO) from Multinational Companies (MNC), GLCs, Small and Medium Enterprises (SME) and other private and public players met to brainstorm what is needed to manifest the road map to 2020 economically. This was how the NKEAs and EPPs had emerged as the focus point for everyone. There is no use of having cars when there are no highways. To embrace such analogy, the NKEAs is believed to require policy synchronisation, which is done by the Government by its Strategic Reform Initiatives (SRI). Key Performance Indicators (KPI) is also required to measure the results (eg. GNI, Jobs). These 3 (NKEAs, SRIs and KPIs) will provide the key elements necessary for the ETP to progress, which are Focus, Competitiveness and Results.
Income per capita is not necessarily a function of quantum alone. It is also a function of quantity. As mentioned earlier, EPPs are expected to create 3.3 million jobs. These jobs will require resources to fill it. For this, the nation's educational blueprint will also be synchronised to ensure that Malaysians are given the opportunity to fill up roles as a matter of priority from those imported from foreign countries. It is expected that 46% of these jobs will require human resources at vocational and diploma level.
So far, only 72 projects have commenced for 54 EPPs. These projects will cost RM106 billion. It is a huge sum of money but if measured against the expected return of RM153 billion GNI per year for 298,865 new jobs, it is a worthwhile investment. These figures show that ETP is the right choice for the nation's future. However, 2020 is far away. The Government in 2020 may not be the same Government today. How do we ensure continuous efforts and commitment is long lasting? The last thing we want is for the Government to foresake the ETP simply because different sets of politicians with different ideologies are in power in the future. To counter this, Government (via Civil Servants and Ministries) will have their appraisals linked to the ETP.
In January 2011, Bursa Malaysia recorded 1,572 points, a good starting point to economic excellence. Some believe that this is the market reaction to the confidence in the Government's efforts to enhance the economy. Let's just hope that this is genuine rather than speculative.
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