This article was first published on The Choice. Do not read if you have no feelings whatsoever towards Malaysia's conditions.
Debunking the Debunker: Propaganda and Populism Make for Voodoo Economics
Anwar Ibrahim looks like a man on the defensive. He is trying to straddle an Opposition coalition where PAS does not get on with DAP over hudud and inside DAP they are busy trying to settle an unpleasant feud between alleged "warlords" and "godfathers." And he is meanwhile facing a verdict in Sodomy II on January 9th.
His solution? To stand up at a dinner in Kuala Lumpur and let loose with a blast of populist rhetoric that tried to turn both economics and common sense on its head.
Hard to believe as it may be, Anwar actually kept a straight face and claimed that the Economic Transformation Programme, which will see a staggering $444 billion of investment, and the creation of more than 3 million new jobs plus the lifting of per capita income levels from US$6,700 in 2009 to US$15,000 in 2020, would actually make millions of Malaysians poorer by 2020!
In his historic dinner speech entitled "Debunking ETP: Widening Income Gap" (historic because it plumbed new depths of demagogy rarely seen before) he tried to argue that he could predict inflation levels for the next 8 years, and that if his worst predictions came true, a big if, then there would be 1.7 million more people earning less than RM 1,500.
Given that Anwar's worst case economic scenario would require inflation to average more than 6 percent from now, at the end of 2011 where inflation is running at about just over half that level, right through 2020, eight years from now and a statistical improbability, that is a big one to swallow. More significantly it is absolutely impossible to predict. And even Anwar's claims of historic data are wonky. He said in his speech that inflation was running at an average of 6.6 percent between 2005 and 2009 while most economists know it was about half as much on average. * Well, he thinks he is smarter than any economist la tu!
Another big "if" in Anwar's speech was that if one were to "extrapolate" from a sample of just 24,000 employers and just 1.3 million workers, another if of gargantuan dimensions, then "if this were to be extrapolated nationally, it suggests that up to 34 percent of our workforce earn below the national poverty line."
The list of if's and up to's and maybe's and perhaps's goes on and on, the extrapolations have little basis in reality. This is not economics. This is not economic policy. This is not proactive or prescriptive or substantive recommendations of any alternative policies being offered by the Opposition. This is good old fashioned populism, or if you wish, this is voodoo economics.
Now let us set the record straight. Some 50 years ago, half of Malaysians lived in absolute poverty with GDP per capita of around RM 788. Today, only about 3 percent live in poverty and per capita income has reached RM 25,000, nearly doubling each decade. Those are facts, not if's.
But as we all know, the world is rapidly changing as historical growth engines are slowing down, and without concrete action, we get stuck in the so-called 'middle income trap.'
Hence the Prime Minister's Economic Transformation Programme, which is aimed at retaining our global competitiveness, capital and talent to become a higher-income, fully developed nation by 2020. This means our current per capita income would again double to just below RM 50,000.
And this is not populist rhetoric. Elaborate laboratories have been set up, studying how to implement this goal, identifying entry point projects and business opportunities. Some 211 companies participated, from Shell to PricewaterhouseCoopers, Ericsson to Tesco, Celcom to Malaysia Airlines. Their contribution was critical as 92 percent of total investments worth $444 billion are slated to come from the private sector.
Industry sectors – called National Key Economic Areas (NKEA) – ranging from oil, gas & energy to tourism, education and healthcare to agriculture, are the drivers of the ETP that will contribute significantly to the economic growth.
Accountability and transparency for this initiative would give many western nations and even our fellow ASEAN partners a run for their money.
Managing the ETP is the Performance Management and Delivery Unit (PEMANDU) and each of the 12 NKEAs is overseen by a Steering Committee, which is chaired by Dato' Sri Idris Jala, a veteran brilliant manager with a successful track record in Shell and MAS, who is accountable for meeting the KPI targets and reports to the Prime Minister.
So Anwar's calling the ETP a "flawed economic model, mired with corruption" that "rewards the ruling echelons" is either disingenuous or downright ignorant, especially as no alternative constructive policies have ever been submitted by the fractious opposition that is pre-occupied with its internal quarrels.
Anwar must be feeling very nervous indeed if all he can do is come up with exaggerated claims about economic statistics that are fanciful to say the least.
Perhaps he has not noticed that Malaysia has for the first time broken into the top 10 of the world's most attractive foreign direct investment destinations, according to global management consultant A.T. Kearney.
Or that Malaysia's foreign direct investment for the first nine months of 2011 has surpassed the figure recorded for the whole of last year.
Or that Malaysia is the top ranked emerging economy in the World Economic Forum's Financial Development Report, which measures the health of financial systems, notching up to 16th position. The Foundation also ranked us 17th in the world for Corporate Governance.
Maybe Anwar did not see that Malaysia is ranked the world's 10th most competitive nation and in 9th place for Government efficiency, according to the IMD World Competitiveness Yearbook 2010.
Or that Malaysia has been upgraded by London's FTSE exchange from Secondary to Advanced Emerging Market in 2010.
And, according to the World Bank, we are the best country in the world for access to credit.
True, all of these numbers and complex policies are not necessarily sexy, but they prove the effectiveness of the macro-economic strategy. And this should not be trivialised, or ignored, or distorted.
Wrapping up his attempt at economic analysis in Kuala Lumpur, Anwar's advice to the Prime Minister was to "use more realistic assumptions detached from political spins and propaganda."
Wow. Look who's talking.-The Choice