Thursday, July 12, 2012

ETP lacks transformative power, will benefit elites most, says REFSA

ETP lacks transformative power, will benefit elites most, says REFSA

July 12, 2012
KUALA LUMPUR, July 12 — The Economic Transformation Programme (ETP) will not create widespread high-paying jobs due to the lack of innovation in its formulation, said the think-tank Research for Social Advancement (REFSA) today.

REFSA estimated that only 21 per cent of the gross national income (GNI) generated by the ETP will go to wage earners, well below developed country norms of about 50 per cent and even below today’s rate of 28 per cent.

It also said that the quality of jobs based on the level of capital investment committed was low.
The research outfit claimed that the ETP’s main problem was that it was using “recycled” projects which were far from being game changers and the way they were selected using the lab technique prevented innovative ideas from flourishing.

“Instead of being transformative, the ETP is, at best, just a very slick repackaging of old ideas,” said REFSA. “These ‘recycled’ projects cannot be expected to result in transformative change or high-income jobs.”

Using the amount of capital invested per employee (CIPE) as a proxy for the level of quality of jobs that will be created, REFSA said that the RM571,000 CIPE of the ETP projects was only slightly above the RM554,000 average achieved by MIDA (Malaysian Investment Development Authority) in the last five years between 2006 and 2011.

Higher CIPE usually translates into increased salaries due to the more sophisticated levels of skills and productivity associated with working with more advanced tools and technology.

REFSA also noted that the numbers actually flatter the ETP, because the ETP total was boosted by mega-projects such as the the Klang Valley MRT and the Petronas RM60 billion RAPID project — which comprised more than 50 per cent of the total committed investment of the ETP as at the end of 2011.

After stripping the two mega-projects out, REFSA said that the CIPE or capital intensity of the remaining EPPs was a “minuscule” RM305,000.

It also noted that even if they were to compare only the ETP’s electrical and electronic (E&E) projects to MIDA’s performance over the last five years, the ETP’s projects under the E&E NKEA (National Key Economic Area) brought in RM429,000 CIPE, still below the MIDA average.

“The very low capital investment per employee is one important indicator of the fatal flaw of the ETP — that it will not transform the lives of the vast majority of Malaysians,” said REFSA.

It added that it found a lack of details with regards to the types of jobs that will be created which would make it difficult for the human resources and education ministries to do their planning.

“Malaysian youths and adults planning their own education and careers will also find such information very useful,” it said.

REFSA’s latest critique of the ETP could potentially raise hackles at PEMANDU which has in the past accused the opposition-linked think-tank of being “biased” and overly concerned with trivial details.

REFSA had previously said that in the ETP’s annual report, RM107.7 billion of GNI and 75,000 jobs equivalent to 45 per cent and 20 per cent of the respective original forecasts were “written off”, which they said raised questions about the level of due diligence exercised during the original forecasts.

PEMANDU responded saying that companies were not used to the concept of GNI and therefore several erroneous assumptions were made when making the initial forecasts which had inflated the GNI impact and the numbers were subsequently revised.

It also said that the ETP was a living document which was constantly being adjusted to fit changing economic and business dynamics.

In some of its responses, PEMANDU also criticised REFSA for not offering better alternatives to the current plans, but the think-tank said today that its final analysis of the ETP’s annual report will contain recommendations.

REFSA is a not-for-profit institute that does research into social, economic and political issues.
Its analysis on the ETP annual report was authored by Ong Kian Ming, who holds degrees in economics from the London School of Economics and Cambridge, and Teh Chi-Chang, a chartered financial analyst who holds a degree in accounting and financial analysis from the University of Warwick, and an MBA from the University of Cambridge.

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