When Prime Minister Dato’ Sri Najib Tun Razak launched the Economic Transformation Programme (ETP) in October 2010, he was met with a healthy dose of scepticism.
Malaysians on the street had their reservations about the successful implementation of the plan while market analysts were concerned about execution risks and gaps. Industry players hung on to their investment dollars for more solid signs of programme viability.
Today, as the Prime Minister delivered the Performance and Management Delivery Unit (PEMANDU)’s third annual report on the ETP’s progress, the conversation, at least among market observers, is already shifting towards the progress of various projects and what the future holds for Malaysia when it achieves its Gross National Income target of USD15,000 (RM48,000) per capita.
Buoyed by the improvement of economic indicators over the past three years, PEMANDU Chief Executive Officer Dato’ Sri Idris Jala (pic) is convinced that, if the current growth trajectory is maintained and barring unforeseen circumstances, Malaysia might be able to achieve its goal of becoming a high income nation before the original 2020 target.
“We believe we are closing the gap (between Malaysia’s GNI and the World Bank’s high income threshold), so it looks good,” he said in a briefing to a room full of senior editors and research analysts.
Malaysia’s GNI per capita has climbed about 42.5% to US$10,060 in 2013 from US$7,059 in 2009 while the country’s gross domestic product (GDP) grew at a slower but moderate pace of 4.7% last year.
Private investments grew at a compound annual growth rate of 15.3% to RM132.8 billion in 2013 from RM86.7 billion in 2010 compared to 4.7% between 2008 and 2010, tripling the compound annual growth rate (CAGR) following the implementation of the ETP.
Based on the Ministry of Finance’s 2013/2014 forecast, government revenue is expected to have risen 38.1% over the past three years to RM220.4 billion in 2013, and the country’s fiscal deficit has declined to 3.9% in 2013 from 6.6% in 2009.
Interestingly, Malaysia’s employee share of the GDP has also risen over the same period with total wages as a percentage of the GDP rising to 32.9% in 2012 from just 31.5% in 2010. This is expected to have risen further with the implementation of minimum wage in 2013.
“Our target is to reach about 40%, which we hope to be able to achieve a bit beyond 2020,” says Minister in the Prime Minister’s department Datuk Seri Abdul Wahid Omar.
Catalysing growth with a clear roadmap
To date, the ETP has achieved its goal of making Malaysia one of the top 10 nations in the world for ease of doing business. It is also closing in on its target to restructure the Malaysian economy to be more services-based.
Most National Key Economic Areas (NKEAs) achieved their key performance indicators for 2013 including healthcare, electrical and electronics, tourism, financial services, business services and wholesale and retail.
In 2013, the ETP had announced 47 new projects that will contribute RM7.4 billion to Malaysia’s GNI by 2020, bring in about RM8 billion worth of committed investments, and create 29,373 new jobs in the process.
This is markedly lower than the numbers in 2010, where 110 projects are estimated to bring in about RM129.5 billion to Malaysia’s GNI by 2020, committed investments of RM179.2 billion, and over 300,000 jobs.
When queried about the dropping numbers, Dato’ Sri Idris replied that these projects were catalysts for the chosen sectors and, through this catalytic approach, the ETP is aimed at impacting the entire Malaysian economy and not just the projects identified within the NKEAs. The investment flows into these NKEAs will result in wider multiplier benefits that spill out across other economic sectors.
“The EPP has a profound impact on the domestic marketplace as a significant uptick in capital expenditure on various EPPs has acted as share price catalysts for certain sectors and stocks,” Alliance Research head of research Bernard Ching says.
A clear roadmap to 2020
Amidst ETP’s successes, there are still challenges to overcome.
Productivity levels, especially in the manufacturing and services sector, need to be improved and corruption at all levels needs to be addressed.
There are also many new opportunities, like those in downstream palm oil activities and solid waste management, that are found wanting for investors and interested parties.
Despite these challenges, the ETP remains a clear, well-defined roadmap for the country to achieve its vision to become a high-income nation by 2020.
Maybank Investment Bank head of research Wong Chew Hann says the ETP is different from other plans in the past as it has focus and it “drills down to the specifics”.
This clarity has helped increase investor confidence at least during the first two years of its implementation.
“When we attended foreign roadshows, the National Key Economic Areas has attracted people’s attention,” Wong says.
“Today, they are more focused on the long term delivery of the plan,” she adds.
Download the 2013 ETP Annual Report here.