Monday, March 9, 2009

Don't blame the NEP, says EPU

The New Economic Policy (NEP), which sought to achieve growth while addressing socio-economic imbalances, is being wrongfully blamed for only benefiting certain people and contributing towards poor economic growth, a top policymaker said.

Economic Planning Unit (EPU) director-general Tan Sri Sulaiman Mahbob, who was directly involved in formulating the NEP in the 1970s, said critics have confused the policy itself with procedural issues such as the procurement system for projects.

And on that particular issue, the government is addressing the matter, where since March last year all projects must go through the tender process, except those that involve national security.

"So, it's not the NEP which is wrong here. Don't blame the policy. I believe in open competition and transparency. I don't believe in a few individuals getting the projects," he said in an interview.

Sulaiman said the NEP, which ended in 1990, and the subsequent growth distribution policies have contributed towards rapid economic growth, employment creation, narrower income disparity, higher income level and poverty reduction.

The NEP (1970-1990) is also not unilateral, he added, because it was implemented in consultation with other stakeholders through the National Economic Consultative Council (Mapen).

Sulaiman said when government projects are implemented, they benefit everybody in terms of higher production and greater pool of skilled manpower. The projects also generate direct benefits to construction material and hardware suppliers, as well as service providers.

"The non-Bumiputeras, who control this supply chain, are also benefiting from the government projects," he said, adding that about 60 per cent of the project cost is the supply of construction materials and hardware.

Sulaiman said some people, without the correct perspective of the policy, are saying that it creates cronyism and dampens foreign investments.

"This is a baseless allegation because hundreds of thousands of wholesalers and small traders exist through the policy. People have also forgotten that many farmers have been freed of poverty through Felda, Felcra, Mada and other programmes," he said.

As for attracting foreign investment, he said, this should be done through greater efficiency, lower cost of doing business, faster decision-making and higher productivity of workforce, and not by doing away with the growth distribution policy.

Sulaiman acknowledged that there were some mega projects such as independent power producers and privatisation of highways that were awarded to only a few Bumiputera and non-Bumiputera companies. This was because at the time, Malaysia's capital market wasn't that strong and not many in the private sector were capable to estimate the risks for such large and long-term projects.

"Since the government needed to upgrade the public infrastructure and utilities, we've had to help those who were involved in the construction of those projects," he said.

Sulaiman said it should be noted that similar growth distribution programmes are being implemented by other countries under different names. In the US, the policy is called Affirmative Programme, it is Regional Development in Thailand, Development of South in Italy and Trans-Migrasi in Indonesia.

The 30 per cent Bumiputera share ownership and the Foreign Investment Committee (FIC) ruling are the only two instruments under the NEP which still exist. The shareholding ruling is only applicable when the company wants to access capital from the public.

"It doesn't cause poor shareholder value. If the stock is not good, even non-Bumiputeras won't buy it. So it has got nothing to do with the 30 per cent Bumiputera shareholding, it's the value of the stock," he stressed.

Sulaiman said the FIC ruling, which was drawn out when foreign ownership in the 1970s was about 70 per cent, is now being liberalised because foreign shareholding has dropped to about 30 per cent.

Sulaiman said the NEP ended in 1990 and through consultation (Mapen 1), the National Development Policy (NDPP) was launched covering the 1990-2000 period. The NDP has given way to the National Vision Policy (2000-2010), which was the resulting consensus of Mapen 2.

Vision 2020 and National Vision Policy also address the same issues that recognise the need to continue to eradicate poverty irrespective of race, and restructure the society.

"The 30 per cent Bumiputera shareholding target has now become a long-term target, until 2020," he said.

No comments: