Is Najib’s New Economic Model the answer?

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What do you think of Najib’s New Economic Model? It has taken such a long time for the administration to realise that the present low-wage export-oriented model is not working.

The need for a new economic model was pointed out in this blog back in October 2008:

One of the larger issues that arises in the face of the global economic slowdown and recession is that the foreign investor-driven, export-oriented economic growth model is clearly not working, especially in times like this when global demand has shrunk. With global stagflation or recession staring at us, capacity is rising and the trickle of foreign investors is drying up.

We should be focusing more on building up a strong, resilient, sustainable domestic economy by providing basic services (housing, health care, food security, public transport, education) rather than relying on foreign investors and now, foreign retirees.

Is Najib’s new model the solution? There are some encouraging bits in it such as the focus on the bottom 40 per cent of the population and the need to improve skills in the workforce.

But quite clearly, the prevailing mainstream economic thinking leaves much to be desired. For instance, instead of moving towards sustainable farming that empowers farmers, the focus remains very much on corporate agribusiness increasingly driven by control of seeds and supply of chemical pesticides and fertilisers. Instead of promoting accessible health care for all as a basic right, the emphasis seems to be on ‘medical tourism’ and tired market-based solutions such as the Full-Paying Patients scheme. And instead of going all-out to plug “leakages’ and fight corruption, the regressive Goods and Services Tax is still on the horizon.

I discussed Najib’s NEM in this piece I wrote for Asia Times:

Malaysian Prime Minister Najib Razak recently unveiled his anticipated New Economic Model (NEM), a policy shift aimed at moving our export-oriented economy towards higher domestic incomes while coping with flagging foreign direct investment (FDI).

The proposals have met with skepticism from the opposition, which claims they don’t do enough to fight corruption and reform democratic institutions, and from a newly formed right-wing group that favors the economic status quo based on racial quotas.

Najib’s NEM pledges to undertake major reforms to create a more competitive domestic economy supported by a stronger public sector and knowledge-based infrastructure. The main target: to more than double per capita annual income by 2020 to $15,000 from the current US$7,000. Full article here.

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semuanya OK kot

Please don’t waste time on this. NEM is unoffcial hot air. A minister answered in Parliament that there is no intention to table the subject.

ravi shan

The New Economic Policy was first mooted by V.I. Lenin in his treatise, ‘One Step Forward, Two Steps Back’. Initially intended to strengthen socialist policies by way of a softly-softly application of controlled capitalism, but we took it and transmogrified it into an extreme form of capitalism cloaked in the muslin of socially-based affirmative action – apartheid by another name. This second-genratiln model goes even further; taking capitalism to its penultimate form: colonialism. So, no Anil, I don’t hold any hope of the NEM of being able to achieve anything but the end of what little sovereignty the rakyat once… Read more »

Iron

Just a tiny correction:

took it and transmogrified it into an extreme form of capitalism cloaked in the muslin of socially-based affirmative action

Methinks the word “socially” ought to be replaced by another word, “RACIALLY” to reflect what is really happening in Malaysia.

Thus, the sentence would look like this:

took it and transmogrified it into an extreme form of capitalism cloaked in the muslin of RACIALLY-based affirmative action

Iron

If only we can make the government sees the light. Google wants to try out the ISP business. http://googleblog.blogspot.com/2010/02/think-big-with-gig-our-experimental.html It’s called Google Fiber Project. They want to set up small number of fiber networks in America, offering speed of 1 Gbps (Gigabit Per Second) fiber-to-the-home to subscribers. I know that Google is looking to try out their experiment in America, but if a government is pro-active enough, even if it does not fall inside the boundary of the United States of America, it should act now and contact Google. If only Lim Guan Eng has that kind of vision, he… Read more »

LBJ

Dear Iron. Adding to my earlier comment. All super Data centers are located in Singapore with smaller ones in Malaysia.

This is similar to the situation in the electronic industry where the advance centers such as R&D and marketing are based in Singapore (employing Malaysians) and the lower tech production in Malaysia.

In other words, we will still find it challenging to move up the income ladder.

Iron

“All super Data centers are located in Singapore with smaller ones in Malaysia. This is similar to the situation in the electronic industry where the advance centers such as R&D and marketing are based in Singapore (employing Malaysians) and the lower tech production in Malaysia. In other words, we will still find it challenging to move up the income ladder.” Dear LBJ, Noted and fully understand why, because I myself have visited 4 datacenters in Malaysia, as well as other datacenters elsewhere. There is no difference in term of hardware – servers are servers, racks are racks, cables are cables,… Read more »

LBJ

Dear Iron. Even your companies websites are not located in Malaysia. What more would other companies?
How can the Carrier Hotel business work?

Iron

Even your companies websites are not located in Malaysia. What more would other companies?
How can the Carrier Hotel business work?

By having a Carrier Hotel and by attracting more foreign ISPs / Internet backbone owners to peer their bandwidth inside it, we would be able to, hopefully, break the monopoly of Telekom Malaysia over the Internet gateway and ( hopefully again ) this would speed up the Net Feed which would make it much more attractive for people to host ( or co-location ) their servers here.

LBJ

Dear Iron. I meant this to be a joke. What can we hope when UMNO and even Dr. M do not host their websites in Malaysia. The key issues with them are reliability and security.

Iron

My companies’ websites are all located in foreign servers, for a simple reason – Customers in Europe and America have a tough time accessing sites hosted inside Malaysia.

It’s all the doings of Telekom Malaysia.

Reliability and security ain’t gonna be a problem, but as long as TM remains as a monopoly … there’s no way to move Malaysia forward in the global Net community.

wira

Go download a copy of the part 1 of the NEAC report on NEM. http://neac.gov.my/sites/default/files/NEM%20for%20Malaysia%20-%20Part%20I_0.pdf It contains many good strategies and policy directions. It also shows data of comparative economies which were at par with us in 1990 (especially some East European economies which came out of the Soviet grasp then)till today. Countries like the Czech Republic, Slovia and Poland managed to transform to higher income economies and are are toady having 2 to 3 times higher per capital income than us while we stagnated from 1997 (The Asian economic crisis) till today. The last 13 years were years of… Read more »

ManiamG

New model, old model, what’s the difference? Playing the same old, broken record. When you’ve politicians with poor track records & questionable character running the country, can anyone expect any good to come out of it?

LBJ

Iron. With regard to the Carrier Hotel, the effect is the same. The idea is still to attract foreign companies to come and locate their data centers here. In the area, Malaysia has even less to offer. What happened to that super data center (presumably Google) that was supposed to come? It went quiet. I was told it went to Singapore. In order to move up the income scale, Malaysia has to find area where it can be number 1 or number 2. Malaysia has to be the best in what it does. The question is what is it that… Read more »

Iron

Dear LBJ, Thanks for the input. “With regard to the Carrier Hotel, the effect is the same. The idea is still to attract foreign companies to come and locate their data centers here.” With regard to the last point, I like to point out the following points: Owner/operator of Datacenters are not restricted to foreigners. Locals too can own datacenters. So with regard to the Carrier Hotel, true, the more “tenants” the better, however, what is lacking in the foreign front could be filled easily by the locals. Do you know that there are several local owned datacenters in JB… Read more »

semuanya OK kot

Sure, its hot air, but expensive hot air. But what’s so great about the APCO contract? Just about every ministry has gigantic PR contracts. Where do you think those customised banners and clothes come from each time a public servant gets ready to break wind? Remember the ads reminding you to call your home? The aspect the big guns love is that there is no objective measure whatsoever on the effectiveness of these “campaigns”. This goes on while good students stop their studies for want of financial aid, poor medical patients despair, and other poor are robbed of low-cost houses… Read more »

Old Timer

There is no light at the end of the tunnel for Malaysia under Najib and his’genius” advisors cum cronies , only gloominess and hopelessness. Nothing they undertook has succeeded, only failures after failures. It has always been some new policies disguised in its old form, nothing spectacular that would make an impact to the nation. The GDP is at its lowest level compared to the neighboring countries. Even Indonesia seems to be overtaking us economically. Do not go around shouting slogans after slogans and painting an economic miracle that does not exist. Come down from from your high celestial chariots… Read more »

Iron

“PROVE TO US!” I think BN has done that, over and over again. Their only intention is to get rich, and they will do it even it bankrupts the country, which is happening, by the way. Other than the dwindling oil and gas reserve, other than the palm oil estates, the rubber estates and the tin mine, and the virgin forest that we are cutting down in a fierce rate, tell me, what our country actually produce? Oh, don’t tell me about the “LCD TV” or “Microwave” or “Microchips”… those are technically *NOT* the product of Malaysia — we just… Read more »

rakyat@work

MIC to DPM: “it has to be Palanivel or Nothing”. what Samy actually meant to say was “Pls lah deh…Palanivel lah.. otherwise…it’s ok also, treat it as Nothing?
Better than Gerakan, at least Samy tried. as best to his ability to act.. Whatever that is from BN, is going to prolong the 52 years of agony..period.

O

Good to take a break from the hassles of daily life.

Happy Vesakhi Anil.

Enjoyed my vegetarian food today with my Malaysians friends!

kunta

Very Interesting in this land . You dont need any relevant knowledge to incharge of a particular department.

All you need to do is to read the pre-prepared text and call it a day.

Then will come a time you will be rewareded in many ways you yourself dont even understand.

Good life Kid.

wira

The NEM contains appropriate policies and measures to propel the growth rate of this country after having stagnated the past 10 years.
Even DSAI acknowledged that the NEM contained many key elements of his Malaysian Economic Agenda.

However, I doubt the PM would have a free hand to implement the ideas expounded in that policy paper. Elements in UMNO, Perkasa and the BTN brainwashed civil service may hijack or sabotage his program.

Ganesh

No point having analysis and intellectual discussion when wastage prevails everywhere.

If one can buy RM27.5 million ringgit of ladies shoes, apa lagi mahu cerita Anil?

godspeed

A NEM model that is applicable is so plain & simple, wonder why malaysians are so oblivious to it. Like any business, you strive to better your margins or move on to a business that has potentials for better margins. It’s not a case of FDI’s becoz in short its like borrowing funds for biz that give you peanuts. The manufacturing sector’s margin are starting to give us peanuts. So what’s the answer, its you Malaysians, what you’ve got to do : Branding = tons of margin for whole load of WORDS as your capital. Services = another ton of… Read more »

frags

There is no political will to implement meaningful change. Watch Najib change his tune every time a certain group questions his policies.

1Malaysia turned out to be a joke, the NEM will be one too. Najib was never known for his foresight, and he never will be.

Iron

Dear Anil, Forget about Najib, I do not believe a single word from that guy anyway. Let’s talk about Penang first, shall we? I read LBJ’s message with much interest. There are a lot of very valid points there. So I’ll try to pick up from there. I’ll also try to pick up from where we left at the Penang Turf Club thread. The way it seems, and I’ve been talking to several of key people of PTF is, it’s a matter of time they gonna demolish the racing track to realize the true value of their property. From where… Read more »

Slim

I see this as a bit “cart before the horse” sort of thing. While the NEM has some merit, it will not get off the ground so long as the PM and DPM continue their Jekyll and Hyde routines, or pander to extremist groups like Perkasa. Malaysia just provides SERVICES and labour to foreign companies and, quite a lot of the time, by using foreign labour. Locally financed manufacturing systems are low technology concerns, and will have to get their act together before any growth can be discerned. Assuming, of course, that they can get suitably qualified workers locally. Given… Read more »

donplaypuks

All the $77 million APCO spin won’t fool anyone. (Actually it’s more than 77 million because they used the latest exch rate of 3:1 whereas at end Dec 2009 it was 3.42!!)

NEM=NEP= old wine in new bottle.

There’s only one way out. Performance, performance, performance!

Otw, it’s all hot air and we’re not in the mood for smokescreens and red herrings!!

dpp
We are all of 1 race, the Human Race

Bigjoe

The plan, idea, and even the wordings are nothing new. It really does not matter whether its a good plan or not. The things outlined – increase productivity, education, higher value industries, narrowing income gap, etc. need to be done. The problem – UMNO/BN can’t do it. Put it this way – if they can’t execute something as simple as PKFZ without messing it up, they can’t do most of what they plan to do. Making the education system better, higher productivity, narrowing income gap etc. – these are things far harder to do on a system basis and they… Read more »

LBJ

My friends and I had been debating on the question on what is there for Malaysia to capitalise on in future. 1. Malaysia rode the wave of the electronic industry growth, but we failed to developed an indigenous industry of our own. Malaysia depended on foreign investment to use labour and services to assemble and manufacture their goods. 2. Now that Malaysia labour is becoming expensive, many production facilities had shifted. Although, Malaysia is still continuing to attract high value manufacturing investment, but it will not be like before. 3. What is there for Malaysia after electronics? We are not… Read more »