Where is the NEM in the 10th Plan?

By Lim Teck Ghee
COMMENT The 10th Malaysia Plan was heavily advertised as the plan that would usher in a new economic era for all Malaysians built on a New Economic Model.
The key features of the NEM were:

• Merit and excellence criteria for all implementation decisions and processes,
• Transparency, accountability and integrity as part of normal business practice,
• Dismantling of quotas, preferences, APs, closed tenders and other non-competitive processes.

Now that it is out, I search in vain for all these criteria and for signs of the major policy reforms that were supposed to be in the pipeline.
Some of the rhetoric remains in the document. There has been a tweaking of strategy here and there. But at the heart of the 10th Plan is still the same model of state-dominated development, and ethnic and crony preference that has driven all the other Malaysia Plans.
The New Economic Model had promised that there would be a focus on raising income levels of all disadvantaged and marginalized groups, irrespective of race. The policy would be “market friendly”, “merit-based”, “transparent” and “needs-based”, and would emphasize the bottom 40% of Malaysia’s income strata, whether individually or regionally, according to the Prime Minister when he first publicly unveiled NEM.
Clearly, the Prime Minister has beaten a hasty retreat from the paradigm shift that was promised. What we have with the latest Malaysia Plan is not NEM but the same old economic model.
30 percent unmoving target
Consider for example the 30% Bumiputera corporate equity ownership target which has been the centrepiece of eight previous plans and which resulted in the wrong emphasis on allocation of scarce resources to a privileged and wealthy Malay class and non-Malay cronies. Not only does this target remain but it is being reinforced beyond corporate equity to other properties and business assets.
The mind boggles at the new wealth opportunities created for the Malay – now extended to other bumiputera and non-Malay elite. Under the earlier NEP dominated model, much of public monies and resources have ended up in the hands of various distributional coalitions tied up with trusteeship of the NEP and related programmes; namely, political, bureaucratic, military and aristocratic.
These coalitions, although dominated by Umno, the No 1 in the ruling coalition, is to some extent multi-racial, has overlapping membership and is built on an intricate network of convergent interests arising from kinship, business and professional relationships (extending even to multi-racial marriages!)
Trusteeship and control of decision-making has resulted in a very rapid process of wealth accumulation under the control of the Malay elite trustees and managers. These consequences follow from biased decision-making in which private and public brokers and facilitators collude behind the scenes.
Taking advantage of their positions and freed from the rigorous checks and balances necessary to ensure that genuine bumiputera and the public interests are fully safeguarded, these groups have been given license to engage in self-enrichment through rent-seeking behavior, exaction of high transaction costs and other forms of non-competitive bargains. These coalitions have emerged as the fatal deadweight burden on the Malaysian economy, augmenting its non-competitive aspects.
No evidence has been presented in the 10th Plan that it will not be business as usual for the distributional coalitions. Instead, the highly lucrative divestment, outsourcing and public-private projects that comprise a key component of the plan promise a new bonanza.
It is significant that the normally taciturn Yong Poh Kon, the co-chair of the Special Task Force to Facilitate Business, has seen it fit to warn that “open tenders [are] necessary to get the best deals for the nation or Malaysia would be saddled with high tariffs and fares for many years to come, making it burdensome to users and affecting the competitiveness of the economy.
Enter Ibrahim Ali …
The scope for abuse by the distributional coalitions led by Umno and the bureaucracy is compounded by the continuation of the overall ethnic approach to development.
The proponents of the NEM had advocated for the cessation of ethnically driven policies. They failed to take into consideration the political clout of the Malay hardliners. Led by Ibrahim Ali of Perkasa and his patron Dr Mahathir Mohamad, these extremists have reduced the non-ethnic approach largely to platitudes.
When Ibrahim told reporters in Parliament after the unveiling of the 10th Plan that “it was really worth our effort [put into the Bumiputera Economic Congress that voiced their public objection to NEM] and it shows that Prime Minister Najib Tun Razak paid heed to the needs of the bumiputera”, he was not boasting. He was merely stating the truth.
Except that Ibrahim Ali missed out mentioning the needs of the bumiputera he was allegedly safeguarding were in fact the elite interests.
In an earlier setting when he first floated NEM, our chameleon Prime Minister had said: “We risk losing our competitive edge altogether if we do not act quickly to address structural barriers to growth that stand in the way of an effective response to the changing economic environment.”
I guess we will have to wait for the 11th Plan to see if this dismantling of structural barriers will finally take place. By then, it may be too late to recover from the tailspin in our economic development.
Lim Teck Ghee is the director of Centre for Policy Initiatives. An early version of this article appeared in the Chinese paper, ‘The Red Tomato’.