ETP Will Make Malaysians Poorer in 2020

Malaysiakini

Opposition Leader Anwar Ibrahim today warned that Malaysians will become poorer in 2020, with an additional 1.7 million people earning below RM1,500, under the current Economic Transformation Programmes (ETP).

In addition, he claimed the brainchild of Prime Minister Najib Abdul Razak will widen the income gap in society based on the projection of ETP.

During a dinner organised by Selangor state government at an upmarket hotel in the capital, Anwar delivered a speech titled ‘Debunking ETP: Widening Income Gap’ to some 150 guests including foreign ambassadors, economists, academicians, MPs, party leaders and journalists.

He said the two important assumptions made by the ETP to justify that Malaysians will earn a gross national income (GNI) per capita of RM48,000 by 2020 were questionable.

First, the 3.6 percent annual wage growth predicted from 2010 to 2020 is over optimistic, because the average growth was only 2.6 percent annually in the past 10 years according to the Human Resources Ministry, and the real wage growth from 1984 to 1997 in the manufacturing and plantation sectors was only 2.3 and 2.8 percent respectively, according to the Asian Development Bank.

“This is further verified by the National Employment Return Study of 2009, involving a sample of 24,000 employers and 1.3 million workers which found that 33.8 percent of the workers were paid below RM700 per month.

“If this were to be extrapolated nationally, it suggests that up to 34 percent of our workforce earn below the national poverty line,” he explained.

Another fundamental flaw, said the former finance minister, is the 2.8 percent average rate of inflation estimated for the period up to 2020, because the average inflation between 2001 and 2005 was 4.8 percent, and 6.6 percent between 2005 and 2009, as a result of the 2008 crude oil price rally worldwide.

“The inflation assumption is crucial to arrive at the magical target of RM48,000 GNI per capita by 2020 that has become the pillar of ETP.

“If inflation, as we have seen in the last few years, grows higher than 2.8 percent in the next few years, real wages will be lower and the GNI per capita target of RM48,000 is nothing more than a number on a fancy ETP brochure,” he elaborated, adding that the environment of high energy and high commodity prices will persist.

He then pointed out that if the inflation rate was 4 percent and wages were to grow at the unrealistic 3.6 percent rate annually for the next 10 years, there will be an additional one million Malaysians earning below the equivalent of today’s RM1,500 per month in 2020.

Should the inflation rate stay at an average of 6 percent, there would be an additional 1.7 million Malaysians earning the same amount in 2020, he warned.

Bleak picture

“The additional 1.7 million urban poor will complete the bleak picture that ETP tries hard to gloss – that is by 2020, there will be between 7 million to 8.3 million urban poor with monthly earnings of RM1,500 and below; according to ETP’s own projections,” he said.

Contrary to what was promised by the ETP, Anwar claimed that the rich will be richer in 2020 should the ETP model of economic development continues.

“Based on the information provided in the official ETP documents, one can construct a business model to ascertain the proportion of economic value going to the employees versus the profits retained by corporations.”

The analysis done by PKR based on the ETP information, he said, showed that ETP and Entry Point Projects (EPPs) will cause real wages to stagnate with only marginal increase over the years, while most of the economic benefits will be retained by corporations.

“In 2009, the GNI of RM661 billion, the ratio of employee compensation to GNI is 40 percent. This simply means that 40 percent of the economic value generated by our economy goes to workers in the form of wages. By 2020, this ratio will drop to 33 percent.

Anwar described the ETP as “nothing more than a continuation of a flawed economic model mired with corruption and a rent-seeking culture that rewards the ruling echelons at the expense of the majority”.

“Its promise to deliver a high income nation status by 2020 is also a fallacy,” he added.

The PKR de facto leader noted that the most important facet of the ETP are the 131 entry point projects (EPPs).

But most of them are nothing more that large-scale infrastructure projects that will consume a large amount of public funds either directly from the public coffers or through funding arrangements with government-linked companies (GLCs) or government-linked investment companies (GLICs).

“If the previous mega projects’ track records are anything to go by, these EPPs also come with huge financial risks to the public due to this government’s poor corporate governance,” he said, citing the example of the newly constructed palace where the project cost ballooned from the initial RM400 million to more than RM1 billion.

“There is also a risk that the diversion of public and GLC/GLIC funds into these EPPs may effectively reduce the nation’s flexibility to deploy fiscal means to manage the economy in the future as Malaysia continues to battle its deficit problems,” added Anwar.

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