New Economic Model deemed a failure

The high-income target was ‘useless’ as it was based on an oversimplified formula


THE New Economic Model (NEM) mooted by former Prime Minister Datuk Seri Mohd Najib Razak is a failure due to its unfeasible targets, experts said.

One of the primary objectives of the economic plan, set out for the 2011-2020 period, was to propel Malaysia to a high-income economy status by 2020, leaping from US$7,000 (RM23,100) per capita annual income in 2010 to US$15,000 in 10 years.

Zouhair Rosli, co-author of the United Nations Children’s Fund (Unicef) Malaysia’s report on “Children Without: A Study of Urban Child Poverty and Deprivation in Low-Cost Flats in Kuala Lumpur”, found that the high-income target was particularly “useless” as it was based on an oversimplified formula.

“How it (high-income status) is measured is, you take the overall income of the nation and divide it by the total population. If you want to reach high-income status, you need an average per capita annual income of RM50,000. You divide that by 12, you get RM4,100 a month. You ask anyone at the universities… no one has that kind of income.

“If you look at data from the Department of Statistics Malaysia, it shows that we have 11 million workers. Out of that figure, 5.5 million workers earn an income below RM1,900 a month. So, where are we going with this RM4,100 a month target?

“I’m not saying we cannot use this target at all, but when the previous government became highly reliant on it, I considered it as a morally corrupt act because they failed to ensure that growth is inclusive,” Zouhair said at a panel session on “Building a Sustainable Socio-Economic Institution for 21st Century Challenges” at the Rise of the Asian Tiger Convention in Shah Alam yesterday.

Zouhair said the inclusiveness principle in the NEM has also failed as its prime focus was to develop infrastructure in key cities.

“The definition of inclusiveness is to ensure that no Malaysian is left out from benefitting from the country’s economic growth. In the NEM, the priority was to develop key cities like Johor Baru, Kota Kinabalu and Kuching.

“If you look at the income gap between the richest state, Selangor, and the poorest, Kelantan, the gap in 1970 until 1990 went down from 3.9% to 2.7%. The same happened between 1990 and 2009, it declined further to 1.6%. However, during the NEM period, the gap widened from 1.7% to over 2%. It means that when you focus on cities, there is nothing for rural folks,” he said.

Meanwhile, another economist and former Wangsa Maju MP Tan Sri Dr Kamal Mat Salih (picture) said institutional failure is the reason why Malaysia is now lagging by five to 10 years in realising the targets set out in Vision 2020.

Kamal said the centralisation of power in the executive branch has led to the institutional collapse in the country where there needs to be proper checks and balances.

“If you go 30-40 years back, Japan and South Korea came to Malaysia to learn from us in the field of sports and governance.

“The Koreans were inspired by the Federal Land Development Authority scheme to develop the Saemaul Undong or the New Village Movement to develop their rural areas in the 70s. So much so that they thanked the Malaysian government for stimulating the South Korean economy which was under (President) Park Chung-hee at that time. Now, they are far ahead of us when we were, in the 60s, at the same level,” Kamal said.

Universiti Kebangsaan Malaysia Associate Prof Dr Madeline Berma said the current government now needs to devise a new economic model that is mindful of four issues — inclusiveness, inequality, sustainability and poverty.

“To me, we will not become an Asian Tiger if we do not address these issues. There is no point if we achieve high growth, but these imbalances and injustices continue to persist,” she said.