NEM to unleash M’sia’s full growth potential

0

KUALA LUMPUR: The New Economic Model (NEM) will be the catalyst to unleash Malaysia’s growth potential in enabling the country to reach a high income status, the National Economic Advisory Council (NEAC) says.The NEM to be achieved through an Economic Trans­formation Pro­gramme (ETP) is one of four key pillars to propel Malaysia towards being an advanced nation, it said in the New Economic Model For Malaysia Part 1 Report released here yesterday.

The other pillars are the 1Malaysia, People First, Performance Now concept and the Government Trans-for­mation Pro­gramme (GTP), whilst the last is the 10th Malaysia Plan (2011-2015) to be unveiled later this year.

The report says Vision 2020 would not be possible without economic, social and government transfor-mation.

“The ETP is meant to transform Malaysia by 2020 into a developed and com­petitive economy, whose people enjoy a high quality of life and high level of income from growth, that is both inclusive and sus-tainable,” it added.

The aftermath of the 1997/1998 Asian financial crisis saw the economy slowing and the country caught in a middle income trap of between low-wage pro­ducers and highly skilled innovators, without a viable high-growth strategy.

Hence, the policies and strategies used to achieve the current state of develop­ment is now inadequate for the next stage of develop­ment, with economic growth coming at conside-rable cost to the environ-ment and which has not benefited all segments of the population.

There is serious risk that the economy may regress if fundamental changes are not made and delayed actions mean Malaysia will be left behind, the report notes.

The NEAC said “The Growth Report” cautioned that of the 13 countries which recorded more than seven per cent growth over the past 25 years, only six eventually managed to attain high income status.

Therefore, Vision 2020 with a new economic model is not possible without a transformation of the economy, the supporting policies and effective delivery of government mandates.

The NEAC also advocates a new, bold approach to obtaining the right eco-system where efficient markets can operate to produce equitable outcomes.

It said the vicious cycle of vested interests had to be broken to remove distor-tions and rent-seeking activi­ties, all of which undermine productivity and entrepreneurship, so vital in creating a vibrant economy.

“Only through a drastic and comprehensive ETP can we break the barriers and achieve a new economy as contemplated in Vision 2020,” it said, adding that, the transition period could be painful for households as well as for firms.

In the meantime, the definition of the social safety net will need refining and the provision of programmes enlarged to include not just the disabled and elderly but also displaced workers.

Furthermore, some form of industrial transformation funds may also be necessary to mitigate the impact on displaced firms.

Not only must the cost of doing business be lowered, the cost of failures too must be reduced to allow for change and encourage risk-taking, the report states.

Although absolute poverty has largely been eradicated, a hefty 40 per cent of Malaysian households remain in the low income category, earning less than RM1,500 a month.

The report says this group required specific policy interventions, especially on capability development, in order to achieve upward mobility.

Income disparities between ethnic groups and regions too must still be actively addressed, it highlighted.

While economic growth will leverage on economic density and agglomeration, inclusiveness requires that development be equally spread out and opportunities equitably accessible, the report highlights. — Bernama