Political Will For New Economic Model - Tan Sri Amirsham A Aziz, NEAC

Tan Sri Amirsham A Aziz, Chairman of the National Economic Advisory Council (NEAC) and former CEO of Maybank, on the new economic model (NEM).

Salient points addressed by Tan Sri Amirsham:

1. The government is not obliged to adopt all of NEAC's recommendations on the NEM but based on coversations with the Prime Minister, Tan Sri believes he is commited in pushing for reforms.

2. Malaysia has produced nine Malaysian plans and poured billions of dollars on infrastructure and supporting affirmative action. Yet our GDP per capita is only $7,000 while countries that were on par or behind us decades ago like Singapore ($37,000), Taiwan ($15,000) and South Korea ($16,000) have surpassed us. Our income per capita is also the lowest among oil producing nations. The question is why should Malaysians believe the administration can deliver on its promises.

3. The NEM report acknowledges political will is needed to push through reforms. The question is what are the real obstacles and why is political will so difficult to muster. And is this a good time for the Prime Minister to push for changes? According to the Merdeka Poll, his approval rating has risen to 68% but more Malaysians place their trust in the Prime Minister (31%) rather than in Umno (22%).

4. Recent events have raised doubts on the government's commitment to make changes. For example, GST (goods and services tax), subsidy reforms and tariff increases have been delayed. Tan Sri says it is justified to do more consultation and education because it will affect the poorest groups.

5. On errors in the contracts disclosed in the Myprocurement website - Tan Sri says it is a new portal and a good idea but it needs more time to develop. Earlier the value of food ration contracts were reported to be worth RM6.4 billion and was subsequently modified to RM6.4 million. Another contract was reported to be worth RM78 million to build a 200 room hostel - the amount was modified to RM7.8 million.

6. Private investments have been lagging in Malaysia. As an indication, the country has fallen to where Indonesia was in the Asian crisis years (1997-99) in terms of investment as a percentage of GDP (20%). The NEAC says it's because the government and GLC involvement in business had crowded out opportunities for the private sector. In going forward, the private sector should take charge in dictating the course of the nation's growth. But in unveiling the NEM, the Prime Minister then announced that EPF will jointly develop 3,000 acres of land in Sungai Buloh. MRCB, another GLC, is expected to be the frontrunner in developing the project. Property players question why there is no beauty contest in managing the development. And questions are raised whether EPF has the necessary experience to be a township developer. Tan Sri says more information is needed to clarify EPF and MRCBs' role in this project.

7. Also the government had set up Danajamin to ensure companies can continue to access the bond market. In effect, the government will be guaranteeing debt securities of issuers. In turn, these issuers will receive AAA rating when previously they wouldn't have qualified for it. Recently, Danajamin announced that it would be guaranteeing Kencana's bond issuance. The question is whether it's necessary for a government-owned organisation to guarantee the debt of a fundamentally strong companies like Kencana. Tan Sri Amirsham believes this government intervention is justified to help the bond market, and he points out that such guarantees do require a commercial fee.

8. Tan Sri Amirsham explains that it's not a misnomer to have market-friendly affirmative action. To achieve this, one needs to build the capacity and capability of 40% of the bottom of the population through education. The NEM report also says some schemes for tilting government tenders towards the bottom 40% will have to be considered but it has to be done on an open and competitive basis. Tan Sri justifies this recommendation of giving out contracts to a select group as common practice in other countries.

9. On the government's goal of achieving income per capita of $15,000 in 10 years time and calling it high income level - Tan Sri explains this is now classified as high income by World Bank standards.

10. On why 80% of the working population only have qualifications up to SPM, and where did our system fail, Tan Sri says what is important is to look forward rather than dwell on the past. On the decision to revert teaching Math and Science in Bahasa Malaysia, he says these subjects are taught in the national language in South Korea too. So the issue is not language, but the quality of teachers.

11. While oil money accounts for 40% of the budget's revenue, Tan Sri is optimistic that the country will be able to manage its budget and sustain 6-7% growth when we become a net importer of oil. This is based on the experience of other countries who have managed to achiever higher growth despite not being oil producers.

12. In the short-term, the priority is to build on our strengths in downstream operations (palm oil), tourism and the Islamic banking industry. While Malaysia has a first mover advantage in Islamic banking, Singapore also has aspirations to become a hub and by offering higher salaries, bankers could be tempted to move to the republic. Some questions were raised on how long we can maintain this competitive edge.

13. On areas like freedom of information act that were not included in the NEM report, Tan Sri says the NEAC's focus is on economic issues. That said, the freedom of information act is supposed to guarantee the right of every citizen access to information like on government contracts. Effectively it promotes openness and transparency. It's also an Act that has been passed in many developed countries.

14. On a personal note, Tan Sri has a two word advice on what it takes to be successful in one's career.