10th Malaysia Plan

Just yesterday Malaysian Prime Minister Datuk Seri Najib Razak unveiled the 10th Malaysia Plan, which comes with a development allocation of RM230 billion. The purpose of this plan is to steer the country to a high-income economy amid challenges of shrinking foreign direct investment and external uncertainties (truth be told I think internal problems are more paramount than external ones; more on this later). Under this plan the government aims for 6% annual GDP growth and increasing living standards and quality of life. 6% is achievable physically because we are growing from a lower base, being a developing country. Whether it is achievable politically is another thing.

The other crucial part of the 10th MP is the plan to reduce the fiscal deficit from 5.3% of GDP in 2010 to below 3% by 2015, in line with European Union standards.

There are 10 ideas on which the 10th MP was based:

1. Internally driven, externally aware;
2. Leveraging on our diversity internationally;
3. Transforming to a high-income nation through specialisation;
4. Unleashing productivity-led growth and innovation;
5. Nurturing, attracting, and retaining top talent;
6. Ensuring equality of opportunities and safeguarding the vulnerable;
7. Concentrated growth, inclusive development;
8. Supporting effective and smart partnerships;
9. Valuing our environmental endowments;
10. Government as a competitive corporation.

However, one thing is worryingly absent: combating corruption. Nepotism and cronyism is still rampant in Malaysia (not least of all, in Sarawak). If nothing is done about that, retaining talent will be difficult because talented young people have no stake to claim in the economic pie. Already, denizens of cities like Sibu in Sarawak are complaining that their cities will become places for old people because their young people leave for brighter opportunities abroad. Big businessmen with connections to government keep getting contracts, which keeps out other companies competing based on merit. There still isn't full transparency on bidding for projects, or an open tender system. If the bumiputera policy is to survive, then there must be some give and take - more meritocracy. Najib has pledged to deliver on this, but only time will tell. Again, we cannot expect Malaysians to be charitable and come back to work in Malaysia once they graduate if the pay they receive is not commensurate with their performance, after living costs have been taken into account. For example, paying an engineering graduate from a reputable university RM2000 a month is just going to make him cheap labour for the Singaporeans!

I'll address all of these points:

1. The external environment in Asia is good - economic growth in China and India will continue to push the region forward, and Malaysia should benefit from this if it gets its policies right. But so far, we have failed to deliver on a superb education system. English is the language of international business, finance, science, and technology; yet the government recently made the bad decision to revert to teaching science and mathematics in Malay. As a result private English-based schools such as Lodge in Kuching will flourish and the income divide may become wider because only a small elite can attain a good English-based education. Many people will be unable to climb out of the poverty trap simply because they (or their children) cannot get a good education. If we are internally driven, this is one of the first things to address. The system of vernacular schools can be said to be broken. We should follow Singapore's model and make English (in science and economics) and Malay compulsory, with every ethnicity required to learn his own vernacular language.

2. I'm not quite sure what this means; if it means promoting Malaysia abroad, I am already doing that in Cambridge by inviting international students to Malaysian events like our Garden Party in 2 days' time!

3. Specialisation and free trade is indeed a good way to increase a nation's wealth. We must, however, have more research and development in place to ensure specialisation in high-tech sectors is sustainable. Malaysia's strengths are certainly plantations and primary products - we just need to continue moving up the value chain in these sectors. Notable progress has been made in palm oil and we are the largest exporter of gloves in the world (if I am not misinformed).

4. In order to increase total factor productivity, we need better education and automisation where necessary. Computerisation in many cases improves efficiency. What we lack is efficiency. Productivity is also hampered by bad infrastracture or malinvestment in it; an example would be urban sprawl in the Klang Valley and the public transport system, which is unable to attract much public use due to its unreliability and lack of reach; hence most people choose to drive and this results in congestion in Kuala Lumpur. Again, the roadblocks towards building a better public transport system are probably political - if Singapore can do it even with a lack of land space, we should be able to deliver as well.

5. Attracting or retaining top talent requires a liveable city and good pay packages as well as fringe benefits. Otherwise, there is no reason why expatriates should not choose to work in Singapore for the higher liveability and currency. However, I don't describe Kuala Lumpur or any big city in Malaysia as particularly "liveable" as yet. Crime rates have to be combatted, greening of the cities introduced (e.g. more trees, water catchment areas, parks), and more covered walkways built to encourage people to walk. The city needs to be pedestrian-friendly as opposed to car-friendly. The Financial Times special report on the Future of Cities could point us in the right direction (I hope some of our leaders read the FT). The top talent to be retained are Malaysians; it is better to educate a Malaysian well and open his mind than to offer a higher pay package to an expatriate, in fact.

6. Equality of opportunities can't really exist if bumiputera targets of 30% ownership of the economy exist. So we should say "equality of opportunities under constraints" to be transparent. While I am not against affirmative action, I think it should not be race-based, but poverty-based. Even if it is race-based, there are many bumiputeras in Sarawak that have yet to reap the benefits of the NEP. The main reason, as we all know, is corruption.

7. Concentrated growth involves economic centres, e.g. the Iskandar Development Region. Well-planned and targeted, it could be a good economic driver and we could reap synergies from across the Causeway. Iskandar could provide a low-cost environment for some back offices of Singapore-based companies as well as provide space for front offices as Singapore is getting congested and land space is only so much.

8. Effective and smart partnerships involve those such as getting the Abu Dhabi Investment Authority to invest USD2 billion in the planned upcoming Kuala Lumpur International Financial District (if it's well done, I'd want to work here). Cost savings and economies of scale could be achieved through smart partnerships. In the automotive industry partnerships are also being forged with foreign automakers like GM and Volkswagen.

9. Malaysia has a super-diverse ecology; this should be preserved and maintained. However, there has been a lot of mismanagement already; 90% of Sarawak's primary forests have already been levelled for timber and a lot of corrupt tycoons and government officials' pockets deepened. When a Sarawakian minister claims that they have looked everywhere for corruption and have not found it; he has probably not looked into a mirror. We have to start protecting nature in our homeland and concentrate on making our cities greener, as I mentioned earlier. We have to be less carbon-intensive, invest in green buildings that make optimum use of sunlight and absorb less heat (only applicable in the tropics though). Concrete jungles and skyscrapers could become edifices of a decadent future if they are not green.

10. Under the Government Transformation Programme and Khazanah's initiative, we are already trying to transform Government-Linked Companies (GLCs) to make them globally competitive. Companies like Sime Darby are still keeling from years of malinvestment and misaligned incentives. So this will be my part to do at Khazanah in the future, perhaps!