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ETP ANNUAL REPORT 2011
Observations:
Private investment has started to recover, although much of this
appears to be driven by the start of a few megaprojects. There
are, however, 72 EPPs which are being implemented, and we saw
significant progress in various sectors, such as reducing red tape in
starting a business and other regulatory issues. Most important is
the emphasis of shifting growth to the private sector, especially in
new areas such as education where the private sector has started
to play a bigger role. The commencement of the Competition
Law is also an important new development, and there are signs
that new dynamic industries are starting to emerge (e.g. medical
tourism and medical devices).
We noted that global indices are recognising Malaysia’s progress
(e.g. the World Economic Forum Index and World Bank Doing
Business Index).
Issues:
As always, there are areas for improvement.
First, to enhance credibility and increase recognition, a way
of clearly linking the NKEA targets and EPP contributions to
GNI and jobs to public data on investment and employment is
needed. Admittedly this is not an easy proces — there are difficult
technical issues in translating what businesses consider to be
investments into gross fixed capital formation in the national
income accounts — but it is a very important one. Related to this,
a clearer presentation of the actual contribution of the ETP to
actual investment in the year under consideration, along with the
split between public, private and Government-Linked Companies
(GLC) investments, would be desirable. Specifically regarding
Petronas projects, they should be considered public investments
given Petronas is 100 percent owned by the Government.
IPR panellists presenting their findings to the Ministers at the Cabinet Away Day
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Second, transformation doesn’t happen overnight, and so ensuring
the sustainability of the ETP is essential. In this regard:
• Moving forward with the Strategic Reform Initiatives (SRI)
is critical. Indeed, we wonder whether the balance of focus
between the EPPs and the SRIs is the right one. We had much
more discussion on the EPPs than regarding the SRIs. Looking
ahead, it will be important that the SRIs are given a much
higher profile
• Ensuring that incentives to enhance investment do not
undermine fiscal and debt sustainability should not be
overlooked. We did see in several sectoral areas an emphasis
on using tax incentives to increase investment. Given current
debt levels in Malaysia and mixed international experience
on the use of tax incentives, we would strongly encourage a
disciplined approach to the use of such instruments, with clear
and transparent rules
• Institutionalising the ETP will also be important, and so getting
the civil service to buy into it will be key
Third, we did also observe some tensions between the sectoral
and the spatial approaches. Greater clarity is needed on how the
numbers under the Greater KL/KV NKEA relate to the numbers
under the other NKEAs. Moreover, focusing on Greater KL raises
the question of why not other cities in the country? There was
also a tendency to take some national issues such as intellectually
property and Talent Corp and classify them under the Greater KL/
KV NKEA.