Pemandu had issued an article to debunk the arguments or myths made by Anwar Ibrahim pertaining the ETP. I took the liberty to find what exactly Anwar had said and juxtapose it with what Pemandu had responded accordingly.
Note that in his usual attacks towards the government, Anwar did not provide any solutions beyond the general statements – better education system, prudent financial spending etc. If he had done so, he could have been a good leader. But when the parties within Pakatan Rakyat are unable to work together to form any comprehensive policies, it must have been safer for him to make such broad and general statements.
Nevertheless, the hypocrisy in him wouldn’t escape us unnoticed when he would nonchalantly criticise policies which he was clearly a part of, benefitted from it and definitely was instrumental in formulating them in the first place when he was in the government years ago.
Anwar Ibrahim: Poorer Malaysians in 2020 due to ETP
His argument: The economic reality that awaits Malaysians in 2020 is harsh, if drastic reforms are not carried out immediately.
If we were to extrapolate ETP’s model using a range of inflation figures, the picture is not one of a prosperous Malaysia for all. It is a bleak Malaysia with more and more Malaysians falling below the poverty line. Malaysians in general will be poorer in 2020, going by ETP’s own projection.
At 4% inflation rate, even if real wages were to grow at the unrealistic 3.6% rate annually for the next 10 years, there will be an additional 1 million Malaysians earning below the equivalent of today’s RM1,500 per month in 2020.
At 6% inflation rate (lower than the average inflation of 6.6% in between 2005 and 2009), there will be an additional 1.7 million Malaysians earning below the threshold income of RM1,500 per month.
The implication of this on our society cannot be taken lightly and outlines the challenges we face and the urgency to address these challenges effectively.
Two-thirds of our population reside in urban areas in 2009. This will grow annually that by 2020, the national poverty line shall reflect closely the cost of living in urban areas. Certainly, the current RM700 national poverty line is obsolete. In many households in urban areas, families struggle to make ends meet with an income of RM1,500 per month.
Thus, the additional 1.7 million Malaysians earning the equivalent of RM1,500 per month in 2020 means that the plight and hardships of the urban poor will be a major economic challenge in 2020.
The additional 1.7 million urban poor will complete the bleak picture that ETP tries hard to gloss – that is by 2020, there will be between 7 million to 8.3 million urban poor with monthly earnings of RM1,500 and below; according to ETP’s own projections.
This means a significantly higher proportion of our workforce and population will fall deeper into poverty in 2020; based on ETP’s economic modelling.
The ramifications of this on the economy are numerous. It will certainly stretch the national resources to the maximum as the government’s obligation to provide direct assistance to the portion of our workforce and population in poverty will be ever increasing.
ETP’s claim that it will send Malaysians on a journey towards prosperity and high income will remain a claim in 2020. The journey will end in nightmare, if Malaysians do not change course immediately.
ETP on that False Statement 1: The ETP will send additional 1.7 million Malaysians into poverty in 2020. By 2020, there will be 7 million to 8 million urban poor with monthly earnings of RM1, 500. This means higher proportion of our workforce and population will fall deeper into poverty in 2020, based on ETP’s planning.
Response: It is not only misleading, but irresponsible to focus on the two lowest income brackets without considering the increases across the board, including the higher income bracket. There also seems to be inconsistencies between the number of urban poor stated vis-à-vis wage bracket projections.
The ETP is anchored on facilitating consistent movement from low to higher income brackets across the board. It anticipates for 600,000 people to be removed from the lowest income bracket of less than RM1,000 per month, one million to move into the RM1,000-RM2,000 bracket, 1.3 million into the RM2,000-RM4,000 bracket, 1.5 million into the RM4,000-RM7,000 bracket, 900,000 into the RM7,000-RM10,000 bracket and 400,000 into the more than RM10,000 bracket.
Under the Government Transformation Programme (GTP), the Government will continue to assist lower income families. Specifically, the Raising Living Standards of Low-Income Households (LIH) National Key Result Area (NKRA) is aimed to empower low income households to improve their social standing and create more income opportunities. Some of the significant efforts undertaken under this NKRA include the 1AZAM programme, aimed at lifting low-income households out of poverty through means of employment, entrepreneurship, economic activities and services.
The ETP, supported by the GTP, aims to share the wealth of the country with all segments of the population, be it urban or rural, regardless of gender, and in all regions.
Anwar Ibrahim: Incorrect assumptions – The devil is in the details
His argument: Another fundamental flaw in the assumption used for ETP is the 2.8% average inflation for the period up to 2020. The inflation assumption is crucial to arrive at the magical target of RM48,000 gross national income (GNI) per capita by 2020 that has become the pillar of ETP. If inflation grows higher than 2.8% in the next few years, real wages will be lower and the GNI per capita target of RM48,000 is nothing more than a number on a fancy ETP brochure.
Much as we like to be optimistic that the nation can rein in inflation in an environment of high commodity and energy prices, we too have to be realistic if we are honest about the future.
The average inflation between 2001 and 2005 is 4.8%, reflecting the first energy price shock of 2003 that saw average crude oil prices moving beyond the psychological US$30 per barrel mark. The average inflation between 2005 and 2009 is even higher at 6.6% as a result of the 2008 crude oil price rally that saw the energy prices sky-rocketing throughout the world.
The environment of high energy and high commodity prices is here to stay. Realistically speaking, the days when the price of a barrel of crude oil is only US$20 is long gone and experts concur that it will settle at an average of US$80 per barrel for the foreseeable future, barring any future geopolitical shocks that may send the price sky-rocketing again.
Thus, we have to question the wisdom of adopting an over optimistic inflation projection of 2.8% over the next 10 years, when no economic, social and political indicators around us point to that direction. I dare say that while it may make ETP looks enticing to the public, it also makes a mockery of our intelligence.
The consequence that these flawed economic assumptions has on ETP is great. The premise that ETP can guarantee higher wages and deliver Malaysia to the path of high income nation status collapses instantly if we were to use more realistic assumptions detached from political spins and propaganda.
ETP on that False Statement 2: The assumption of 2.8% inflation for the period up to 2020 doesn’t reflect the current economic environment.
Response: The 6% average annual growth projected by the ETP required for Malaysia to achieve high income nation is real growth, and excludes the inflation factor. This means that we are able to adapt to the inflation rate, whatever it may be at.
In 2009, the World Bank defined high income as USD$12,196. In 2010, it was USD$12,276. Based on the World Bank’s projected growth rates, by 2020 we will need to hit USD$15,000 per capita gross national income. This target was set independent of the ETP. Our efforts are aimed at achieving the standards set by the World Bank.
Between 2005 and 2010, Malaysia’s inflation rate averaged 2.77 per cent; this includes an all-time high of 8.5 per cent in August 2008 due to high oil prices. As at October 2011, inflation is up 3.4 per cent year-on-year while for the period of January to October 2011, it is up 3.2 per cent year-on-year.
Based on historical and current data, an assumption of 2.8 per cent inflation over 10 years from 2011 to 2020 is reasonable. ETP targets are definitely still relevant.
More response to false statements can be read here.