Posts in category: Insights

When PEMANDU started work on the National Transformation Programme (NTP) in 2009, we had two general sentiments beating down our front door – measured optimism and pure cynicism. The career cynics had zero faith that the NTP would deliver any impact, while the measured optimists were willing to give the Government a chance.

The NTP set out to address seven social issues that were of concern to Malaysians at the time. Subsequently, we identified 12 priority economic sectors with six policy enablers to grow Malaysia’s economy in a manner that is inclusive and sustainable, with the view of propelling the nation out of the middle-income trap into high-income status by 2020.

Today, as we enter the NTP’s eighth year, I wholeheartedly believe that all the Ministries, Departments, Agencies and private sector project owners involved have been steadfast in moving the country’s transformation forward, despite the naysayers. Steadily, the Government has delivered evident outcomes from its promises made under the NTP.

The results and challenges faced are evident in our six Annual Reports published since 2011. Let me highlight here, some of the key achievements to date. Chief among these was the launch of the much-anticipated Mass Rapid Transit (MRT) Line 1 on 17 July 2017. I believe the MRT has ushered in a new era of public transport in Malaysia, where close to a million people can be transported over 100km daily in a fast, convenient and environmentally-friendly way.

Steps to revamp our education system, although a mammoth task, have also borne fruit. Our students are now progressively doing better against global benchmarks. The Trends International Mathematics and Science (TIMSS) study showed that Malaysian schoolchildren’s ability in those subjects improved significantly in 2015 from the last study in 2011. For Science, Malaysia was among 16 countries recording the highest score of 471, up from 426 in 2011, while for Mathematics our students recorded 465 points from 440 in 2011.

These initiatives, like other activities under the NTP, enable us to be competitive as we pursue our aspirations of becoming a high-income and developed nation. And even as we journey towards a new phase for Malaysia, we have ensured social issues, such as public safety, are not neglected. Since 2010, we have almost halved Index Crime to record a total decline of 47% up until 2016.

Underpinning these achievements has been our steady march towards high-income status. According to the World Bank, Malaysia’s GNI per capita amounted to US$9,850 in 2016, putting us within sight of its high-income threshold of US$12,235.

Indeed, we have been closing the gap between middle and high-income by leaps and bounds – in 2009 our GNI per capita was “stuck” at US$7,620, separated by a gulf of 34% from the World Bank’s high-income threshold. As at 2015 we bridged the divide to 19%, marking our move out of the middle-income trap.

For Malaysians, this translated into growth in the median monthly household income to RM4,585 in 2014 from RM3,626 in 2012, representing an increase of 11% annually. Additionally, we have succeeded in systematically reducing the incidence of poverty in our country to 0.6% as at 2014 from 3.8% in 2009.

Even more heartening has been the income growth within income groups, with the bottom 40% of income earners (B40) charting the largest increase. Starting at a median and mean monthly income of RM1,440 in 2009, up until 2014 the group has recorded a compounded annual growth rate (CAGR) of 13% to RM2,629 in median monthly income, and a CAGR of 12% to RM2,537 in mean monthly income.

Furthermore, we surpassed our target of growing B40 mean monthly income to RM2,300 at 2015, as identified in the 10th Malaysia Plan, ahead of schedule in 2014 where we recorded RM2,313. The middle 40% of income earners (M40), have also seen their median and mean monthly incomes rising, at a CAGR of 9% each to RM5,465 and RM5,662, respectively.

Our target of growing the B40 mean monthly income from RM1,440(2009) to RM2,300(2015) was met in 2014, ahead of schedule.

NOTE: Data for 2014 Household income survey are based on interim report and inflation data for 2012 is based on CPI until August 2014
Source: 11th Malaysia Plan

Yet, the NTP’s high-income target is only one facet of the work that the Government has done to strengthen our domestic position – especially in the midst of a volatile global economy which has prevailed since 2008. Another design of the NTP, and I quote Datuk Seri Mustapa Mohamed, our International Trade and Industry Minister, “[The NTP] had turned the country from an input-driven, low-wage and low-skill economy into that which is innovative, technology-based and has value-added skills.”

For example, initiatives under the Oil, Gas and Energy NKEA are focused on growing the sector’s downstream segment, which can yield higher value as opposed to just relying on revenues from crude oil exports. One definitive project is the Pengerang Integrated Petroleum Complex (PIPC) in Johor, which houses PETRONAS’ Pengerang Integrated Complex (PIC) and Dialog Group Bhd’s Pengerang Deepwater Terminal (PDT). PIC is the single largest downstream/infrastructure investment project in Malaysia and continues to progress well towards its full completion by 2035. PIC reached 50% completion as at the end of 2016, while the construction of phase two of PDT is underway following the completion of its first phase.

The NTP is also anchored on raising Malaysia’s global competitiveness, as the size of our domestic market caps the growth potential of local companies. To this end, we introduced competition laws, are driving the adoption of global standards to enable our local products to compete in the international market, and liberalised selected industries and sectors to create an environment conducive for business.

Collectively, our efforts have garnered Malaysia global attention and recognition – The IMD World Competitiveness Yearbook ranked Malaysia 14th out of 61 countries in 2016 from 18th of 57 countries in 2009 and since mid-2015, Malaysia has received an ‘A-’ sovereign rating and stable outlook from Fitch Ratings, which was maintained in October 2016 despite the tough year for all.

As we pick up our stride in 2017, I ask for Malaysians to keep their belief and hope for our country strong. Dispense with the noise and focus our energy on the work to deliver our high-income nation target. We still have a lot of work ahead of us to achieve our targets but we are seeing evident outcomes from the roadmap we first published in 2010.

Every year, we publish a detailed document of what has been achieved under the NTP, the KPI scores and traffic lights on items where we met targets (green), missed targets (red) and partially met targets (amber). For readers interested in these details, please visit the Download Centre to view the annual reports.

The wake of the 1997 Asian financial crisis was the moment at which it became apparent, to all but the most cynical pundits, that the Four Asian Tigers did not merely survive because of luck or coincidence. It is, instead, its robust foundation that kept their economies relatively unscathed.

Between 1960s to 1990s, the Tigers — Hong Kong, Singapore, Taiwan and South Korea, created what economists called the “the Asian Miracle”, recording on average in excess of 7% GDP growth annually. At a time where most Asian countries were struggling to escape the poverty trap, The Tigers proved to the world that that it is possible for a low-income country to attain fast and strong growth, provided that the right policies are implemented.

And indeed, a miracle it is.

For decades, countries such as Brazil, South Africa, Indonesia, etc., have been diligently attempting to replicate the Tigers’ miracle without any success. These countries are currently stuck in what economists label as ‘the middle-income trap’. It describes where a middle-income nation’s economy has been stagnant for a long period of time and is struggling to transition to a high-income nation.

One of the biggest and fastest growing economies of the world, China, is also said to be stuck in the middle-income trap. Since recording an annual average GDP growth of 9.4% between 1978 – 2012, its economy recently begun to slow down, gradually slipping from 7.8% in 2012 to 6.7% in 2016, the weakest growth in 26 years.

Why the middle-income trap exists

Economists today have yet to find a prescribed path for avoiding or moving away from the middle-income trap. Hong Kong, South Korea and Taiwan, for instance, took as little as seven years to achieve it. In the case of countries like Argentina and Greece, it took more than three decades.

Based on case studies, the lack of foresight, is perhaps the biggest reason why the middle income trap exist.

For most low-income countries, after opening up and adopting a capitalist mindset, growth is attainable through the production of labour intensive and low cost products. However, as a country continues to grow, so does various aspects of its ‘supply chain’. This includes, but is not limited to, the demand of higher wages, sophistication of products and skilled human capital — all at the expense of its growing but still fragile economy.

As living standards rise, the current labour force driving the economy is also expected to shrink. Individuals with higher earnings potential will seek better-paid employment and comfortable jobs. Thus, the government will need to ensure the foundation of the economy (large, traditional industries the government rely to drive the economy forward) is not jeopardised and at the same time, actively seek for new sources of income to ensure the growth is not stagnant.

For an economy to prosper, it cannot be complacent; it has to continuously innovate and transform in order to become more competitive in high-income markets. Unfortunately, this is often costly, require skilled talents and significant investments in infrastructures.

No easy way out

The European Union (EU) was Greece’s golden ticket to high-income nation status.

Once a major centre for arts, philosophy and politics, Greece is one of the few countries which managed to escape the prison of the middle-income trap after close to three decades of stagnant growth.

To jump-start its economy post the collapse of a military dictatorship in the mid-1970, the Greek government embarked on a series of high deficit spending policies, done via heavy borrowings from various governments and international institutions.

The borrowings were made possible because of Greece’s EU membership. Despite realising that the country does not have the ability to return its borrowings, institutions and governments were still willing to make high risk loans to Greece, on the assumption that EU is the ultimate guarantor.

Greece eventually incurred an immensely high sovereign debt when its debt-to-GDP ratio ballooned to 176% in 2015, creating a major debt crisis in Europe. The unsustainable growth is also evident in other countries which were once stuck in the middle-income trap — Japan (debt-to-GDP ratio was at 248% in 2015), United States, and Singapore (both debt-to-GDP ratios at more than 100% in 2015).

In brief — there are no short cuts in breaking free of the middle-income trap, it requires long-term dedication and planning to ensure an economy’s growth is sustainable. A total of three key areas should be focused on by governments around the world.

Firstly, there needs to be policies stressing the creation of new growth engines, transforming the economy to an innovation-led, high value-added market. Instead of investing in easily imitable products and services with existing technologies, investments should be made on research and development to produce value-added products. Naturally, this has to be covered by adequate intellectual property protection. In short — one must build their own.

Secondly, countries require a robust education framework promoting knowledge and innovation. This investment needs to be substantial and implemented long-term, producing skilled workers who are able to bring the economy forward in the future and for generations to come.

Lastly, the need for advanced communication infrastructures (Information and Communication Technologies and high-speed communication networks) to promote the dissemination of information and knowledge. In the case of the Republic of Korea, the nation invested heavily in infrastructure and educational system post the Korean War in the 1950s. With a strong foundation in place, the country was able to focus on the goal of increasing international competitiveness through upscaling its technological industry (as seen in the meteoric rise of Samsung and LG in the world).

The goal here is to move up the “value chain” and growth by breaking into fast-growing markets.

Transformation principles

Once the pathway is clear, it is essential to institutionalise a transformation mindset. This is done through enforcing a set of transformational guidelines that all should adhere to.

In any transformation process, the first thing to tackle is the fear of failure. For countries which have been stuck in the middle-income trap for decades, a defeatist/fixed mindset has undoubtedly been developed. Thus, the adoption of a ‘growth mindset’ is crucial. According to Sir Richard Branson, Founder of Virgin Group, this means inculcating a mindset where one is “willing to learn, happy to make mistakes, and eager to experiment”.

This is also about ensuring one does not stay in a defeatist/fixed mindset as this will far too often, make ideas stagnate, businesses stop growing and people stop learning.

Secondly, transformation requires all to put their differences aside and work towards a single goal. For Jack Ma, the founder of Alibaba Group Holdings, one can never unify everyone’s thoughts in an organisation. However, one can definitely unify everyone through a common goal.

Finally, all actions need to be done with ruthless prioritisation and anchored on a number of key performance indicators (KPIs). This is what Dato’ Sri Idris Jala, CEO of PEMANDU Associates, calls the DMS model – Do it relentlessly, Monitor it constantly and Solve problems reclusively. We need to understand that there are no short cuts in any successful implementation and should always be ready for failure and expect to go back to the ‘drawing board’.

Better quality of life

Countries in pursuit of high-income nation status should never be overly-focused on escaping the middle-income trap at all cost. Instead, they need to understand and be prepared for a set of new problems that comes with being a high-income nation.

Elevated risk of obesity, call for better quality of education, increased environmental pollution, are some of the many ‘first world problems’ that may arise.

As such, better quality of life is the end goal all countries should seek to attain. Becoming a high-income nation is far beyond fulfilling a set of ‘well-defined numbers’ set out by various international institutions. According to the Social Progress Imperative, this also includes taking into consideration the foundations of wellbeing (education, technology & life expectancy) and opportunity (personal rights, freedom of choice and tolerance).

These are the key principles that a nation must apply in creating a sustainable and impactful high-income nation.

The road to success was never easy and the journey is often paved with ambiguity and uncertainty. The Tigers’ miracle stories, albeit useful and helpful, should never be treated as an infallible guide for countries seeking to escape the shackles of middle-income trap.

At the end of the day, it is the quality of life that counts for an individual, never the wealth that one owns.

It’s experiential. It’s emotive. It’s provocative. The modern age has brought about a new way of communication. Information and newsfeeds are at our fingertips. The opportunity for anything and everything to go viral across ever expanding social media platforms is faster than the speed it takes to verify the authenticity of the source.

All it takes if for a disgruntled and disapproving social media user to have a bad experience with what you say or your service delivery and you’re finished – both online and off.

This is the real challenge faced by most public-sector organisations and governments of the day. Public expectations need to be met. The public demands for credible responses. They demand accountability, transparency and effective delivery. They want action, not promises.

There is an urgency to cut through the clutter and noise, forming a clear and trusted line of messaging, facilitate participation and buy-in.

The guiding principle is openness

Effective public-sector communication is about dialogue. It’s about engaging with individuals and communities at all levels and providing them a platform to voice their views and opinions. It’s about providing action and delivery to meet their needs.

Public sector communication has to be seen and regarded as a service to the general public. Constant engagement to foster participation is needed to build accountability and trust in the Government. Even more so when a Government is embarking on a national transformation agenda.

In any transformation agenda, communication is essential for effective consultation and engagement, informing policy-making and service design. The Government of Malaysia took on a bold new approach to communication in 2012 when they started their national transformation journey.

They were single-minded in promoting effective communication as a behavioural change from within – from the act of doing or implementation – closer integration of policy development, service delivery and communications functions. This ultimate led to better policies and services.

Getting the public to participate and to be informed was crucial in the communication process. Anchored by BFR Methodology’s 8 steps of Transformation, the Government of Malaysia was able to communicate effectively by being:

1. Inclusive in identifying the issues to resolve through a series of public labs.
2. Consultative with the public in finalising the solutions.
3. Accountable in reporting on the transformation delivery progress via monthly public updates and ultimately, the publication of annual reports every year end since 2010.

Political neutrality is a cornerstone of public sector communications.

While clarity and factual presentation of government policies, intended delivery and achievements are important, what helps complete efforts of building public confidence is trust in neutrality. Political neutrality is a cornerstone of public sector communications.

Real time communication

Effective communication has to thus take on a real-time approach. Public sector and government communications must engage with audiences. 24 hours a day. Clearly. Efficiently. It takes a deep dive into the transformation journey, walking the target audience through the transformation process by sharing measurable positive impacts of the beneficiaries periodically and when it happens.

Modern technology offers many tools for direct, unmediated communications with the public but these need to be used effectively. They should be credible, efficient and prompt disseminators of authoritative information. They should answer questions accurately, honestly and completely.

Be as good as the best in any sector. Be fast. Be accurate. Be concise.

All these are done in the hope that greater trust can be built amongst the public sector, government, general public and the media. Government communication needs to be as good as best in any sector. It needs to be fast. Accurate. Concise. And. To reach the audience wherever they are.

Communication is critical to transformation

At the heat of the policy process and public service development is the element of communication. The general public can and will judge the quality of decision and the delivery of services that affects their lives by means of their sight, feel and hearsay. Clarity and regular engagement is critical. Public sector and government organisations must be accountable for what they do, be prepared to explain and defend decisions, and also to admit mistakes.

Public sector and governmental organisations must develop effective communication strategies and engagements that link communications explicitly to the achievement and delivery of their national transformation outcomes. Only then can positive behavioural change exist and thrive.