COMMENT We are dismayed to find perception manipulation and deception still surrounds the Economic Transformation Programme (ETP).

The mainstream media today is full of praise and claims of excellent performance and transformation. This is exactly the opposite of the true picture.

Research for Social Advancement (Refsa) wishes to draw attention to three points:

  1. Real national income growth has been pedestrian at under five percent per year, which is well below the six percent targeted by the ETP. The Performance Management Delivery Unit (Pemandu) of the Prime Minister's Department is manipulating perception by trumpeting nominal gross national income (GNI) numbers, which include inflation, and in US$, which are rrelevant to the vast majority of Malaysians;
  2. Pemandu still cannot get its basic maths and data right. It said (nominal) GNI per capita hit US$9,970 in 2012, but also said it was RM30,809 and the exchange rate was RM3.058:US$1. However, at that exchange rate, RM30,809 is equivalent to US$10,075. It is shocking that this high-powered unit cannot even get the basics correct; and
  3. Based on Department of Statistics data, nominal GNI per capita grew an average of just 7.4 percent per year from 2009 to 2012, which is less than the 8.2 percent per year average growth rate registered from 2001 to 2010. Pemandu and the ETP came into force in 2010. In short, the ETP and Pemandu have failed to increase our GNI per capita above its long-term growth trajectory.

National income growth target failed

"Propelling Malaysia towards becoming a high-income developed nation", as promised by the ETP requires our GNI to grow by six percent per year. Pemandu(1) gave much prominence to this six percent per year growth target in its "A Roadmap for Malaysia" report that launched the ETP with much fanfare in 2010(2).

However, the just published 2012 Annual Report of the ETP makes not a single reference to the fact that the ETP failed to meet this crucial six percent per year growth target last year. The fact is, real GNI grew by a pedestrian 4.3 percent in 2012(3), well below Pemandu's aspirations and even lower than the 4.9 percent recorded in 2011.

More perception manipulation and deception

Rather than address the core issues impeding growth, Pemandu continues to practise perception manipulation and deception in its efforts to hoodwink Malaysians into believing it has reached or exceeded its targets.

Firstly, its 2012 ETP Annual Report quoted real gross domestic product (GDP) growth rates, which at 5.1 percent and 5.6 percent in 2011 and 2012(4), were higher than the GNI growth and presented a slightly better picture of the sad situation.

Secondly, when discussing GNI, Pemandu used nominal numbers (which include inflation) and the US dollar, instead of Malaysian ringgit. The 2012 ETP Annual Report states: " The country's GNI per capita has risen from US$6,700 in 2009 to US$9,970* in 2012. This represents a 48.8 percent surge in just a two-year period. Based on current projections and barring unforeseen circumstances, this gives Malaysia the potential to achieve a GNI per capita of US$15,000 earlier than the 2020 target." (5)

As pointed out in our Focus Papers critiquing the ETP, quoting nominal numbers, including inflation, can be misleading(6). Inflation does not make us any richer. If our incomes go up by 15 percent, and so do the cost of the things we buy, we are not any richer, because the extra income is spent on paying more expensive prices for the goods and services that we use.

We also pointed out that a weakening US dollar will not directly help most Malaysians. Say your household income is RM3,000 a month (in line with about 70 percent of Malaysian households). At RM3:US$1, that is equivalent to US$1,000.

Say the US dollar weakens to RM2.50:US$1. You still earn RM3,000 per month, but that's now worth US$1,200, which Pemandu can then claim is an impressive 20 percent increase. But you live here and spend here. Your teh tarik still costs RM1.50, your coffee shop lunch RM5...

The US dollar increase is certainly helpful if you are visiting the United States, but on a RM3,000 household income, that is an unlikely possibility. Rich Malaysians who travel overseas extensively will certainly benefit from a weaker US dollar, but not the vast majority of Malaysians(7).

Pemandu still cannot even get its basic maths right

Let's go back to the part saying GNI per capita had "risen from US$6,700 in 2009 to US$9,970 in 2012" and that "this represents a 48.8 percent surge in just a two-year period"(8). Not only is 2009 to 2012 a three-year period rather than a two-year period, the calculations for GNI per capita in 2012 are also misleading. GNI per capita in 2012 at RM30,809 and an exchange rate of RM3.058 to US$1 translates into a GNI per capita of US$10,075, rather than US$9,970.

So what are the correct numbers? Until the high-powered and highly-paid staff and consultants at Pemandu can get their basic maths right, let's start from first principles and use data from the Department of Statistics.

The latest set of GNI figures from the Department of Statistics (which Pemandu surely has access to as well), shows GNI per capita at RM24,879 for 2009 and RM30,809 for 2012. This works out to a mere 23.8 percent GNI per capita growth from 2009 to 2012, less than half the 48.8 percent figure cited in the Annual Report!

On average, this works out to a 7.4 percent per year growth in nominal GNI per capita for the three years from 2009 to 2012, which is less than the 8.2 percent per year average growth rate registered from 2001 to 2010(9).

Our GNI per capita has been below the long-term trajectory after Pemandu and the ETP came into force in 2010. In other words, the ETP and Pemandu have had no impact in increasing our GNI per capita above its long-term growth trajectory!

Sources:

(1) The Performance Management and Delivery Unit within the Prime Minister's Department, which is better known by its acronym Pemandu, is the government agency that created, and is now steering, the ETP.

(2) This six percent target was very prominently highlighted at the very start of the Executive Summary on page 5 of the Economic Transformation Programme - A Roadmap for Malaysia publication.

(3) Fourth Quarter National Accounts, Pg iv .

(4) Exhibit A, Pg 6, ETP Annual Report 2012.

(5) Pg 8, ETP Annual Report 2012.

(6) For a simple explanation of the important difference between 'nominal' and 'real' growth, please read our Focus Paper A Critique of the ETP (Part 2) - We won't really be twice as rich in 2020 at www.refsa.org

(7) Covered in Part 1 of our series, Dissecting the ETP Annual Report: Grade A+ for Obfuscation . Available at www.refsa.org

(8) The dodgy maths and data underpinning the ETP is covered in our Focus Paper ,A Critique of the ETP (Part 2) - We won't really be twice as rich in 2020 and also in Part 4 of our series Dissecting the ETP Annual Report, 45% of GNI and 20% of Jobs Disappeared in Recalibration. Available at www.refsa.org

(9) Derived from data published in Bank Negara's Monthly Statistical Bulletins. The nominal GNI per capita was RM26,175 in in 2010 and in 2011, it was RM12,859. The compound average growth rate (CAGR) calculated is 8.2 percent.

This article appeared on the website of the Research for Social Advancement (Refsa) on March 20, 2013. It is reproduced here with permission.