• Dissecting the ETP Annual Report (Part 4): 45pc of GNI and 20pc of jobs disappeared in ‘recalibration’

    ‘Massive revision’ better describes the loss of GNI (Gross National Income) and jobs. In the ETP Annual Report, PEMANDU glossed over the changes when it ‘recalibrated’ the investments, GNI contributions and job creation numbers of the various entry point projects (EPPs). But the changes are enormous. RM107.7 billion of GNI and 75,000 jobs equivalent to 45 per cent and 20 per cent of the respective original forecasts were written off.

    Did some EPPS fraudulently exaggerate their potential impact?

    Changes of 5-10 per cent can be accepted as ‘recalibration’ in the normal course of changing business conditions. But a whopping 45 per cent reduction in GNI contribution means that the original forecast was nearly double the level that is now considered realistic. It appears that some EPPs had presented forecasts that extremely exaggerated their potential.

    The much-vaunted ETP labs failed.

    PEMANDU makes much of the ‘labs’ that chose these EPPs that will supposedly take us to high-income status. But it is now clear that PEMANDU’s highly-qualified professionals and expensive consultants failed to detect mammoth discrepancies and exercise sufficient due diligence. Were these EPPs with exaggerated forecasts chosen instead of other projects which were more realistic and honest?

    What remedial action is PEMANDU taking?

    The lack of explanations and disclosure by PEMANDU on such massive changes is shocking. What type of jobs disappeared? Which projects severely overstated their contributions? And most importantly, what remedial action is PEMANDU taking to make up for these chasms?

    PEMANDU shrugged off the disappearance of RM107.7 billion of GNI (Gross National Income) and 75,000 jobs as ‘recalibration’.

    The 45 per cent downward ‘recalibration’ in GNI contribution means the original GNI forecast was nearly double the level that is now considered realistic. Were projects with wildly exaggerated forecasts chosen as EPPs instead of others with more realistic and honest assessments? PEMANDU should explain the issues and remedial measures taken instead of glossing over these massive changes.

    For those who have come in late … 

    So far in our dissection of the 2011 Annual Report   of the Economic Transformation Program (ETP ):

    1. Part 1 (The ‘D’ata in our DEEDS framework) highlighted how PEMANDU very adroitly masked the fact that real national income growth last year was below its target;

    2. Part 2 (The ‘E’xecution in DEEDS) unearthed the shocking case of PEMANDU taking “100 per cent” credit in its Annual Report for a RM1.9 billion wafer fab plant that was never actually built; and

    3. Part 3 (The ‘E’nterprise in DEEDS) uncovered the startling gap between committed and actual investments. The RM12.9 billion of actual investments is a mere 7 per cent of the RM179 billion committed investments that PEMANDU prefers to emphasise.

    Diversity – where was RM107.7 billion of GNI lost? 

    Part 4 today was supposed to have focused on Diversity of the ETP (the second ‘D’ in DEEDS). How spread out are the various entry point projects (EPPs) and new jobs across the 12 NKEAs? However, this analysis is now impossible as PEMANDU has dramatically revised down key figures in the ‘recalibration’ disclosed in the ETP Annual Report without offering adequate explanations:

    1. The GNI (Gross National Income) contribution of the EPPs was slashed by RM107.7 billion, a massive 45 per cent plunge from the RM237.2 billion level reported in November 2011;

    2. In the very same ‘recalibration’ exercise, 75,000 jobs equivalent to nearly 20 per cent of total jobs disappeared.

    These massive changes raise troubling questions over the due diligence exercised by the highly-qualified staff and expensive consultants at PEMANDU. Changes of say, 5-10 per cent, can be accepted as ‘recalibration’ in the normal course of changing business conditions. But a whopping 45 per cent change suggests a serious failure when selecting the supposedly transformative Entry Point Projects (EPPs) that would take us to high-income status by 2020.

    Were projects with more conservative, but realistic GNI and jobs forecasts overlooked in favour of those that inflated their numbers? How do these ‘recalibrations’ affect the overall ETP goals? We delve further into these issues in this Focus Paper.

    ‘Recalibrated’, but what were the original numbers?

    “For the 2011 Annual Report, we engaged PricewaterhouseCoopers (PwC), an independent audit firm, to conduct a series of Agreed-Upon-Procedures (AUPs) to ensure the accuracy of our reporting. During the course of the AUP, we recalibrated the committed investments, projected GNI contribution in 2020 and projected jobs created.”- pg 8, ETP Annual Report

    On the surface, the above sounds quite sensible and innocuous. One might even say PEMANDU deserves praise for engaging an independent audit firm; and for fine-tuning its investments, Gross National Income (GNI) and job creation numbers following input from the audit firm. PEMANDU went on to say:

    “The recalibration has resulted in a revised committed investment of RM179.2 billion, GNI of RM129.5 billion and 313,741 new jobs. This rigorous exercise is extremely useful to help us establish clear accounting and best practices that will ensure greater accuracy as we move forward.” (emphasis is as per the ETP annual report)

    However, as we have discovered all too often with PEMANDU and the ETP, things are quite murky under the slick façade. Given the importance of this recalibration exercise, it is only reasonable to expect PEMANDU to show the details of the changes in figures and explain where and why these changes occurred. However, PEMANDU tells us only what the recalibrated investment, GNI and jobs created figures are. Nowhere in the Annual Report does it state what the original figures were, and it offers a mere one paragraph explanation for the ‘recalibration’.

    It would not matter so much if the ‘recalibration’ had involved minor changes. However, as the numbers show, the ‘recalibration’ could better be described as a ‘massive revision’. Based on our analysis, the ‘recalibrated’ GNI contribution is 45 per cent less than before, and the number of jobs is down by 20 per cent. ‘Massive revision’ is a better term than ‘recalibration’

    GNI down by 45 per cent; number of jobs down by nearly 20 per cent

    Table 1 below shows the extent to which the investment, GNI and jobs created figures were ‘recalibrated’. Note that the downward ‘recalibrations’ for GNI contribution and jobs created were massive:

    • GNI contribution was almost halved from RM237.2 billion to RM129.5 billion, a decrease of RM107.7 billion or 45 per cent;

    • Jobs created were revised down by nearly 20 per cent or 75,522 jobs.

    Table 1: ‘Recalibration’ resulted in loss of RM107.7 billion of GNI and over 75,000 jobs

    Figures in Nov 2011

    Recalibrated Figures in ETPAnnual Report

    Difference

    Change in %

    Investment

    RM177b

    RM179b

    +RM2b

    +1.1%

    GNIcontribution

    RM237.2b

    RM129.5b

    -RM107.7b

    -45.4%

    Jobs created

    389,263

    313,741

    -75,522

    -19.4%

    Source: 2011 figures as reported in ETP new projects bring total committed investments to RM177.1bil. Yvonne Tan, the Star 11 Nov 2011  .

    PEMANDU explained away these massive revisions in one paragraph:

    “The revision of the investment and job creation numbers is primarily due to changes in business plans over the next five years, in tandem with changing business dynamics. In addition, there is a significant revision in the GNI forecast. Being a relatively new concept, most corporations struggled with it.”- pg 9, ETP Annual Report

    The lack of disclosure is appalling. Given the magnitude of these ‘recalibrations’, it is perfectly reasonable to ask which Entry Point Projects (EPPs) and National Key Economic Areas (NKEAs) were most affected.  In plain language:

    1. Where did the 75,522 jobs disappear from? What type of jobs were these? High, low or middle-income, and in which EPPs?

    2. How was RM107.7 billion of GNI lost? Which EPPs and NKEAs were most affected?

    3. And most important of all, what remedial action is PEMANDU taking to make up for these chasms?

    Did some EPPs fraudulently exaggerate their forecasts?

    There is an even more important issue which affects the very foundations of the ETP.  Did some EPPs intentionally overstate their GNI and jobs contribution impact? We conjecture that some must have. Changes of say, 5-10 per cent, can be accepted as ‘recalibration’ in the normal course of changing business conditions. But a whopping 45 per cent change suggests that at least some EPPs fraudulently overstated their impact on GNI.

    Were these EPPs then selected instead of other projects which were more honest and realistic in their projections? This again brings to the fore serious questions on the much-vaunted lab process at PEMANDU and how transformative the EPPs really are.

    Or did PEMANDU fail badly in its due diligence?

    PEMANDU says the downward reduction in GNI is because some corporations “struggled” with this “relatively new concept”. We have already had dialogues with PEMANDU over its preference for quoting GNI instead of the more commonly used GDP (Gross Domestic Product), and its obfuscation between GNI and GDP when presenting its economic impact. Now, the GNI contribution forecast has been revised down by nearly half. Or put another way, the GNI forecasts made by the EPPs were nearly double what they should have been.

    Granted, some corporations “struggled” with this new concept, but surely PEMANDU’s team of highly-qualified professionals should have some sense of the magnitude of the projections made. Surely they should have detected that the GNI claims made by these EPPs were double the numbers that were reasonably feasible, and helped these corporations that were struggling to present more realistic numbers rather than accept the grossly exaggerated claims.

    While corporations might have some excuse in unfamiliarity with GNI, the same excuse is not valid for job projections. It is normal project management procedure to identify the manpower requirements to complete a project. Of course, we do not expect 100% accuracy. But a slashing of nearly 20 per cent suggests some very major embellishment in the original forecasts which PEMANDU and its expensive consultants failed to detect.

    To clear the air, PEMANDU should disclose in detail the changes in GNI and job creation claimed by each individual EPP.  This information should be readily available. As PEMANDU said on page 250 of the ETP Annual Report:

    “PEMANDU engaged PricewaterhouseCoopers (PwC), an independent third party, to conduct a series of agreed-upon procedures. This work includes agreeing the information and data inputs used in the determination of selected reported KPIs and the 2020 GNI, investments and 2020 jobs created statistics, to information provided by the EPP sponsors and Project Owners…

    … Over the course of this exercise, PwC’s findings highlighted a number of exceptions, which have been subsequently addressed and reflected in the Annual Report. The PEMANDU team has since applied these procedures to the remainder of the projects to ensure that the appropriate rigour and discipline is used in determining the ETP’s results in 2011.”

    If these rigorous procedures were indeed followed for each of the 110 projects announced under the ETP Progress Updates, then surely PEMANDU should have no problems publishing the individual investment, GNI contribution and jobs created figures for each EPP and explain any changes, especially in terms of GNI contributions and jobs created.

    Such information would also be very pertinent to the participants in the labs who presented projects for consideration but which were ultimately not accepted as EPPs. Did their projects get a fair chance? Were their projects jettisoned in favour of others that presented much more rosy but unrealistic forecasts which, as we now see, have had to be dramatically scaled back?

    Are the ETP’s original targets still intact? 

    The ETP, as originally detailed in the ETP Roadmap published in October 2010, calls for:

    • 131 entry point projects (EPPs) ;

    • within 12 National Key Economic Areas (NKEAs);

    • which will pour RM1.4 trillion worth of investment into the economy;

    • create 3.3 million new jobs; and

    • contribute RM800 billion of incremental GNI by the year 2020 .

    Now, in the very first year of implementation, RM107.7 billion of GNI and 75,522 new jobs have been wiped out.  PEMANDU has been silent about how it intends to close these chasms in order to meet the overall final targets by 2020.

    And has the ETP become even more mega-project and oil-and-gas dominated?

    Note from Table 1 that the committed investments amount bucked the trend, rising by RM2 billion despite the downward ‘recalibrations’ in GNI and jobs. We suspect that upward revisions for the MRT project compensated for downward adjustments in the private sector EPPs . If so, this would mean an even greater reliance on public (government) investments, which is the polar opposite of the private sector investments that the ETP is supposed to promote.

    Coupled with the potential problems at some high profile private sector EPPs which we highlighted in Parts 2 and 3 of this series, our fears that the ETP is currently being dominated by mega-projects and the oil, gas and energy sector are heightened rather than assuaged.

    We call on PEMANDU to share the original and ‘recalibrated’ figures for each EPP. This will allow analysts and interested parties to keep track and be assured that the diversity and mix of the NKEAs in terms of investment, GNI contribution and jobs created is still in accordance with the ETP’s original targets.

    About DEEDS

    Earlier this year, we published a series assessing PEMANDU and the ETP on the goals, plans and targets stated in the ETP Roadmap document. To facilitate constructive discourse and in keeping with the spirit of the alphabet soup of NKEAs, NKRAs, SRIs, EPPs, and GNI surrounding the entire GTP, we evaluated PEMANDU and the ETP on its DEEDS – Data transparency, Execution, Enterprise, Diversity and Socio-Economic Impact. The 8 Focus Papers in this Critique of the ETP Series, together with related infographics and a powerpoint presentation can be found at www.refsa.org.

    *Visiting contributor Dr Ong Kian Ming holds a PhD in Political Science from Duke University and Economics degrees from the University of Cambridge and the London School of Economics. He is attached to UCSI University, which has been named as the project owner of two entry point projects (EPPs). To avoid any potential conflict of interest, he will not make references to or analyse these two EPPs. 

    *Executive Director Teh Chi-Chang holds a first class degree in Accounting & Financial Analysis from the University of Warwick, an MBA from the University of Cambridge and the CFA (Chartered Financial Analyst) charter. Prior to joining REFSA, he headed highly-regarded investment research teams covering Malaysia, and was himself highly-ranked as an analyst. 

    This article was published by The Malaysian Insider.

    Read Dr. Ong’s critiques of the ETP in full here.

  • Implications of rebasing and revising our national accounts

    Something interesting happened to our national economy in May 2012. Our per capita Gross National Income (GNI) increased from RM29,094 to RM29,661. Our GDP increased from RM853 billion to RM881 billion and our GNI increased from RM831 billion to RM859 billion.

    And all of these are nominal figures for the year ending 2011. Did we suddenly grow richer without actually realising it? Did we discover some hidden loose change in the deep recesses of the nation’s glove compartment or underneath the car seat?

    Sadly, we’re not going to find an extra RM567 in our bank accounts, BR1M notwithstanding. These revisions occurred as part of a larger “rebasing” of our national accounts, a regular exercise undertaken by the Department of Statistics, due to improvements in data collection methods and conceptual innovations in the way we measure economic activity.

    For this particular exercise, the base year to measure real economic activity was changed from 2000 to 2005 (hence the term “rebasing”). Previous base years were 1970, 1978 and 1987. This means that data for real economic activity such as GDP and GNI have been revised upwards as has nominal economic data, as indicated in the opening paragraph.

    There are a few reasons why these statistical revisions are important, especially for the readers of this paper.

    Firstly, they constitute important measures for policy makers who want to achieve certain economic targets. For example, the 2 per cent upwards revision in GNI per capita means that the nation is that much closer to the RM48,000 GNI per capita by 2020 goal set by the Economic Transformation Programme (ETP). The upwards revision in nominal GNI by RM28b or 3.4 per cent also means that the goal of an RM1.7 trillion economy by 2020 is closer to being achieved.

    With these revisions, it also means that some of the intermediate and longer term targets set by the ETP may have to be revised. For example, using the ETP’s linear projection method of calculating its GNI targets, the nominal GNI target for 2012 will be RM894.

    This means that nominal GNI only has to increase by 4.1 per cent from 2011 to 2012, and this target will surely be exceeded by a large margin, not necessarily because of the success of the ETP but more to do with the calculation method and the recent statistical revisions.

    In addition, it may make sense for the RM1.7 trillion by 2020 target to be revised upwards given that it only requires an average nominal growth rate of 7.9 per cent from 2012 to 2020 in order to reach this target which is less than the 8.2 per cent average growth rate achieved from 2001 to 2010.

    A more ambitious goal of a 10 per cent nominal GNI growth rate and a 6 per cent real GNI growth rate (assuming a more realistic 4 per cent GNI Deflator rather than the 2.8 per cent inflation rate which the ETP uses) would give us a target of a RM2 trillion economy with a GNI per capita of RM64,000 by 2020.

    This revision also affects the government debt to GDP ratio. With the upwards revision in nominal GDP, our debt to GDP ratio at the end of 2011 has decreased from 53.5 per cent to 51.8 per cent, which means that the possibility of breaching the 55 per cent government debt to GDP statutory limit has been decreased, temporarily at least.

    Investors and rating agencies then have to decide if this decrease in government debt to GDP ratio is economically significant or just a statistical “gimmick”, especially in terms of the government’s ability to continue to finance an increasing debt level and to raise tax revenue.

    Secondly, these revisions are also important to economists, especially those who do more serious economic analysis and forecasting based on past data. They must, for example, make sure that they are comparing like to like, such as comparing real GDP in 2011 in 2005 constant prices to GDP in 2006 using 2005 as the base year rather than the GDP figure calculated using 2000 as the base year.

    They must also understand how the individual components of the national accounts have been changed as a result of the rebasing exercise. The devil is in the detail and there are many details within our national accounts which tell us different things about the underlying structure of our economy.

    For example, private investment or private gross fixed capital formation (GFCF), which is a component of national income using the expenditure method of calculation, increased by 19.4 per cent and 14.4 per cent in nominal and real terms respectively from 2010 to 2011 before the rebasing exercise.

    After rebasing, calculations show that private investment grew by a smaller percentage, 16.6 per cent and 12.2 per cent in nominal and real terms, respectively. The astute economist would want to dig deeper and find out the explanation for this difference.

    Economists would also want to understand some of the major changes in methodology in compiling our national accounts. For example, expenditure on weapons systems has been reclassified as capital formation or public investment whereas previously it was categorized as government or public consumption.

    This may skew the picture of how much public spending is going into capital investment which is more likely to yield long term positive knock on effects such as roads and other physical infrastructure as compared to public investment in military systems and weapons, which has a much smaller long term multiplier effect, if any.

    Thirdly, understanding these revisions is important for basic economic literacy. While some of the more technical aspects of this revision such as methodology and data sources may be too esoteric to be of interest to those who are not data geeks, a basic understanding of the nation’s economy is necessary for the average professional.

    Once one is equipped with an understanding of real versus nominal GNI and GDP, measured in 2000 or 2005 constant prices or current prices pre or post 2005 rebasing, one can easily evaluate if statements concerning the larger economy coming from politicians, economists and analysts actually make economic sense. And a higher level of economic literacy will, hopefully, keep politicians, economist and analysts honest, at least when it comes to speaking and writing about the state of the nation’s economy.

    * Ong Kian Ming holds a PhD in Political Science from Duke University. He is a lecturer and political analyst at UCSI University. 

    This article was published by The Malaysian Insider.

  • Dissecting the ETP Annual Report (Part 3): It was only RM12.9 billion of actual investments

    It’s a long way from “committed” to “actual”. PEMANDU trumpets in its Annual Report that the ETP has brought in RM179 billion of investments. What is downplayed is that the RM179 billion is for committed investments. Actual investments under the ETP were just RM12.9 billion — a mere 7 per cent of the RM179 billion committed.

    The committed investments figure is also doubtful. We found at least five projects worth RM17 billion where the ultimate investments may be less than promised. For example, PEMANDU took “110 per cent” credit for villa pre-bookings at the RM9.6 billion Karambunai Integrated Resort. But the project developer is being sued for defaulting on RM18 million of rental payments.  Does it have the financial capability to deliver the new villas?

    PEMANDU is stealing credit again. It said that the RM94 billion worth of private investments in Malaysia last year was “some 113 per cent above our target”. That seriously overstates PEMANDU’s performance given that PEMANDU brought in only RM12.9 billion, and that RM12.9 billion includes both private and government investments.

    Private enterprises are rejecting the ETP. The private sector is targeted to account for 60 per cent of ETP investments, but so far is contributing only 37 per cent of the total. PEMANDU should explain the issues and the remedial measures being taken instead of trotting out misleading statistics and comparisons that pretend that all is well.

    ● Actual ETP investments totalled just RM12.9 billion — a mere 7 per cent of the RM179 billion committed investments that PEMANDU prefers to highlight.

    ● Even the committed figure can be questioned. Some EPP project owners are being sued for paltry amounts, leading to doubts about their financial capability.

    ● Private investments account for just 37 per cent of ETP investments so far, well below the 60 per cent targeted by the ETP.

    ● PEMANDU should explain the issues and remedial measures taken instead of pretending that all is well.

    For those who have come in late … 

    The story so far in our dissection of the 2011 Annual Report  of the Economic Transformation Program (ETP):

    1. In Part 1 (The “D”ata in our DEEDS framework) we gave PEMANDU an A+ for obfuscation. Its talents include the very adroit masking of the fact that real national income growth last year was below par;

    2. Part 2 (The “E”xecution in DEEDS) unearthed the shocking case of PEMANDU taking “100 per cent” credit in its Annual Report for a RM1.9 billion wafer fab plant that was never actually built.

    Enterprise — the ETP has failed to attract private investments

    Part 3 (The “E”nterprise in DEEDS) today highlights:

    1. That actual investments under the ETP totalled just RM12.9 billion last year, a mere 7 per cent of the RM179 billion committed investments that PEMANDU prefers to emphasise;

    2. Yet another example of PEMANDU stealing credit and obfuscating data. This time, the result is to overstate PEMANDU’s contribution in increasing private investments in Malaysia; and

    3. Doubts about the committed investments figure. At least two big ticket private sector EPPs — Karambunai Integrated Resort and Tanjong Agas Oil & Gas Hub — may not deliver as much economic transformation or investments as PEMANDU would like us to believe.

    It’s a long way from “committed” to “actual”

    PEMANDU makes much of the investments brought in by the ETP. The figure stands at RM179 billion as at end 2011, according to PEMANDU. What is downplayed is that the RM179 billion figure represents “committed”, not actual investments.

    The gap between actual and committed investments is huge. A Maybank report in April 2012 states that only RM12.9 billion of investments had been realised in 2011. RM12.9 billion is just 7 per cent of the headline RM179 billion “committed” investments.

    Which means PEMANDU is stealing credit again

    PEMANDU in the ETP Annual Report says “private investment in 2011 amounted to RM94 billion, some 113 per cent above our target”. There are two major issues here:

    1. Firstly, actual investments under the ETP were only RM12.9 billion in 2011, and that amount encompasses private and government-linked investments. So PEMANDU deserves very little credit for the RM94 billion private investments actually achieved across the whole country;

    2. Secondly, PEMANDU’s claimed RM83 billion target in private investments is very low and easily achieved, very much like its claimed GNI “target” that we demolished in Part 1 of this series.

    The Ministry of Finance as far back as October 2010 had already projected private investment of RM86 billion in 2011. Why is PEMANDU, which is supposed to be adding value and transforming the economy, targeting a level lower than that anticipated by the Ministry of Finance? In fact, PEMANDU’s professed RM83 billion target is equivalent to a paltry 2.7 per cent growth in real private investment.

    PEMANDU is also conveniently confusing real and nominal numbers

    By this time, we should not be surprised that PEMANDU misuses figures and targets in order to embellish the “achievements” of the ETP. But what did capture our attention was the creative use of real versus nominal figures to boost the appearance of “overachievement”.

    On page 7 of the ETP Annual Report, PEMANDU states that:

    “… the 19.4 per cent private sector investment growth was well above the 6.7 per cent average growth between 2000 and 2010 and ahead of the 12.8 per cent average growth targeted under the 10th Malaysia Plan. This development validated our push to make the private sector the engine of economic growth.”

    What PEMANDU conveniently left out is the fact that the 19.4 per cent private investment growth last year is a NOMINAL figure while the 12.8 per cent target under the 10th Malaysia Plan is a REAL target. Nominal figures include inflation, while real figures strip out inflation to see how much growth there really is. For example, if your salary goes up by 5 per cent, but inflation has increased by 10 per cent, you are really worse off even though your nominal salary has gone up. Your real salary has in fact gone down by 5 per cent (5 per cent salary increase minus 10 per cent inflation).

    The 10th Malaysia Plan clearly shows that 12.8 per cent is the real investment target. By choosing to contrast the REAL target of 12.8 per cent against the NOMINAL achievement of 19.4 per cent, PEMANDU is once again obfuscating the facts to create the illusion of massive outperformance.

    Defenders of PEMANDU might point out that the 19.4 per cent nominal private investment growth achieved in 2011 is still higher than the nominal 10th Malaysia Plan target of 16.2 per cent. That might well be the case. But do remember — 19.4 per cent was actual investment growth across the whole economy, and amounted to RM94 billion in total private investments.

    As we mentioned earlier, PEMANDU and the ETP actually delivered only RM12.9 billion of investments of the RM179 billion committed. This RM12.9 billion would come from both government and private sectors. So PEMANDU can take very little credit for the actual private investments achieved in Malaysia last year.

    Moving on, even PEMANDU’s claim of RM179 billion of committed investments is questionable. Last week, we revealed that PEMANDU took 100 per cent credit for the construction of a wafer fab plant even though the RM1.9 billion plant was never actually built. This week, we highlight doubts over two mega-projects — Karambunai Integrated Resort City and Tanjong Agas Oil & Gas Hub.

    Karambunai IR — selling new villas while in default

    The RM9.6 billion Karambunai Integrated Resort City (Karambunai IR), Entry Point Project in Sabah under the Tourism NKEA, was the largest private sector EPP at the time the ETP Annual Report was published.

    In the ETP Annual Report, PEMANDU scored itself 110 per cent under Method 1 of its KPI measurement. It disclosed that 43.9 per cent of the beachfront and golf course villas had been pre-booked, exceeding its 40 per cent target.

    We shall not dwell on why the target was set at 40 per cent, and not, say, 45 per cent or 50 per cent, in which case PEMANDU would have underperformed and deserved less than full marks. The 40 per cent target had never been disclosed prior to the claim of overachievement, let alone adequately explained. It is a case very much like the dodgy GNI (Gross National Income) “target” we exposed in Part 1 of this series and the RM83 billion private investment “target” we covered earlier.

    All might indeed be well, or, this might be another example of PEMANDU’s tunnel vision where a focus on “ticking the boxes” replaces common sense. We had earlier raised concerns about Karambunai IR, which included:

    1. The ballooning taxpayer support — which had soared six-fold from RM100 million to at least RM600 million in a few months;

    2. Its viability — without a casino, it would need more visitors than all those arriving at Kota Kinabalu airport to break-even; and

    3. The capability of the project developer, Karambunai Corp Berhad.

    PEMANDU’s response to our concerns alluded to processes including “multiple safeguards and filters” but failed to include key data that would incontrovertibly rebut our worries.

    Now, in this case, while pre-bookings are apparently on-track at Karamabunai IR, its developer, Karambunai Corp, is being sued by some 100 investors in its Nexus Residence development in Kota Kinabalu. These investors, who had bought luxury beachfront properties which were completed in 2009, claim the company is nearly one year in arrears on rental payments due to them.

    The annual rental on the 243 luxury beachfront villas amounts to some RM18 million only. If Karambunai Corp has difficulty paying this small amount, does it have the financial capability to deliver on the new villas, pre-booking notwithstanding? Recall that as far back as October 2010, the Star reported:

    Still, scepticism abounds on Karambunai’s ability to execute this grand plan, not least because of its weak financial status. The company has been in the red for the past three financial years…. In addition, it has piled on huge debts with short-term borrowings of RM192.07mil and long-term borrowings of RM283.77mil.

    PEMANDU might well maintain that its “safeguards and filters” are in place. We do hope that the PEMANDU positive sign-off on this project is indeed reassurance that the RM600 million taxpayer-funded infrastructure development for this project will not be in vain.

    Tanjong Agas — RM3 billion > RM30 billion > 0?

    The Tanjong Agas Oil and Gas and Logistics Industrial Park in Pekan, Pahang is part of EPP 4 under the Oil, Gas and Energy NKEA. PEMANDU in November 2010 said that RM3 billion of investments was expected in Tanjong Agas between 2011 and 2012. The ETP Annual Report in April 2012 went on to proclaim that a total investment of RM30 billion is expected in the next 10 years.

    The validity of this assertion is questionable, given that the very same Annual Report says little about progress so far. Two other projects under this EPP with foreign partners — in Pengerang, Johor and Pulau Daat , Labuan — were cited as achievements. But nothing was said about the RM620 investment commitment into Tanjong Agas by the Dubai-based Oilfield Supply Center (OSC) announced in October 2010.

    REFSA had raised red flags on this project in its earlier series:

    1. Firstly, the concessionaire to develop the park, Tanjong Agas Supply Base and Marine Services Sdn Bhd (TASBMS), is financially weak. As at September 30, 2010, its RM38.9 million liabilities outweighed its RM2.6 million of assets; it made a RM12.2 million loss and earned just RM92,000 of revenue in that financial year;

    2. Secondly, it is very hard to see the economic logic of this project. The government’s own Eastern Corridor Economic Region plan identifies Kerteh and Gebeng as the focus areas for oil and gas clusters, and Petronas is now developing the Refinery and Petrochemical Integrated Development (RAPID) project in Pengerang, Johor, which is also an EPP.

    It has also been reported that the infrastructure development — proper access roads, sewerage and drainage — is far from complete, almost three years after this project was first launched in 2009.

    These five EPPs comprise 25 per cent of total committed private investments under the ETP

    The five projects named here and in Part 2 in this series — Karambunai IR, Tanjong Agas, L Foundry, Damansara City 2 and Pangkor Island Marina Extension — make up RM17 billion or 25 per cent of the total RM67 billion worth of private investments named thus far under the ETP.

    At this point, astute readers will ask, how does this RM67 billion total relate to the RM94 billion of private investments in Malaysia last year? We apologise if all these numbers are confusing. Even we find it difficult unravelling the morass of PEMANDU’s obfuscation. The short answer is:

    1. We calculated the RM67 billion total from the various ETP updates which involved non-government and non-GLC stakeholders;

    Note also that the technical term for the RM94 billion in private investments is Gross Fixed Capital Formation (GFCF). Simply put, this is new machinery and buildings and other improvements to fixed assets. It also includes replacement capital expenditure, which would have been made by private entrepreneurs as part of their business-as-usual plans regardless of the ETP.

    2. Bear in mind, the RM67 billion is for committed private investments under the ETP, whereas the RM94 billion represents actual total private investment in Malaysia, that is, including investments which are not under the ETP. Actual ETP total (private and government) investments were just RM12.9 billion;

    3. PEMANDU proudly proclaims that the ETP has RM179 billion of committed total investments. Based on our calculations, this means that RM112 billion or 63 per cent of the total committed ETP investments is from government-linked corporations (GLCs) and the government. If the investment figures for the five private sector projects we mention here are revised down, the share of government and GLCs will be even higher.

    The ETP has failed to attract private investment

    Yet another PEMANDU misstatement is now exposed. PEMANDU claims that private investment in Malaysia in 2011 exceeded its targets and that “This development validated our push to make the private sector the engine of economic growth.”

    Sadly, the truth is the ETP actually delivered just RM12.9 billion of total investments in 2011, from private, government-linked and government sources. This is a small fraction of the total RM94 billion of private and RM171 billion of total investments achieved in Malaysia in 2011.

    Furthermore, the veracity of PEMANDU’s claim of RM179 billion of total committed private and government investments as at end 2011 is doubtful. We have so far highlighted just five entry point projects that collectively account for 25 per cent of total private investments under the ETP whose financial sustainability may be in doubt. Excluding these would significantly affect the investments, incremental GNI and jobs created that PEMANDU claims the ETP has achieved.

    What should PEMANDU do?

    A crucial thrust of the ETP is to restore the private sector as the driver of economic growth. To this end, the ETP targets 8:32:60 ratio of investments from government, GLCs and the private sector. However, as it stands, government and GLCs already account for 63-65 per cent of the committed investments so far.

    We reiterate our call: PEMANDU must take the bull by the horns and address the root causes of why the private sector has little confidence in the long-term potential of the country to invest capital in the so-called “shovel-ready projects” under the ETP. To do this, PEMANDU should:

    1. Stop obfuscating by cherry-picking and trotting out misleading statistics and comparisons. This is unproductive and intellectually dishonest; and

    2. Explain the issues and the remedial measures being taken where there are deviations from the targets.

    If private sector investment is lagging, hiding behind different sets of data will not take us to high-income status. PEMANDU must demonstrate that it is able to mobilise the private sector to drive economic growth through the EPPs.

    About DEEDS

    Earlier this year, we published a series assessing PEMANDU and the ETP on the goals, plans and targets stated in the ETP Roadmap document. To facilitate constructive discourse and in keeping with the spirit of the alphabet soup of NKEAs, NKRAs, SRIs, EPPs, and GNI surrounding the entire GTP, we evaluated PEMANDU and the ETP on its DEEDS — Data transparency, Execution, Enterprise, Diversity and Socio-Economic Impact. The 8 Focus Papers in this Critique of the ETP Series, together with related infographics and a powerpoint presentation can be found at www.refsa.org. — REFSA (Research for Social Advancement)

    * Dr Ong Kian Ming holds a PhD in Political Science from Duke University and Economics degrees from the University of Cambridge and the London School of Economics. He is attached to UCSI University, which has been named as the project owner of two entry point projects (EPPs). To avoid any potential conflict of interest, he will not make references to or analyse these two EPPs. 

    * REFSA (Research for Social Advancement) executive director Teh Chi-Chang holds a first-class degree in Accounting & Financial Analysis from the University of Warwick, an MBA from the University of Cambridge and the CFA (Chartered Financial Analyst) charter. Prior to joining REFSA, he headed highly-regarded investment research teams covering Malaysia, and was himself highly-ranked as an analyst. 

    This article was published by The Malaysian Insider.

    Read Dr. Ong’s critiques of the ETP in full here

  • The strange case of recycled ICs in Sabah

    Many of the problems uncovered thus far by the Malaysian Electoral Roll Analysis Project (Merap) are not directly attributable to the Election Commission (EC).

    The responsibility of issuing identity cards and ensuring that as far as possible the holders of these cards are Malaysian citizens who live in valid residences is under the jurisdiction of the National Registration Department (NRD).

    While it would be more reassuring if the EC were playing a more pro-active role by questioning the NRD regarding some of the problems identified, it would be unfair to blame the EC, for example, if NRD were giving out ICs to non-Malaysians, thereby allowing these people to registered as voters.

    In this article, I want to highlight a few major problems with the allocation of IC numbers by the NRD to voters in Sabah, a state where many cases of non-citizens being given ICs have been long documented under ‘Project IC’ or ‘Project M’ with the intention of wresting the state government back from Parti Bersatu Sabah (PBS) after it left the BN coalition just prior to the 1990 general elections.

    These examples are especially troubling because it shows active complicity by the NRD in changing IC numbers, transferring IC numbers from one person to another and allowing more than one person to ‘share’ the same IC number.

    My preliminary analysis, obtained by comparing voter details in the electoral roll used in Sabah in the 2008 general elections with the electoral roll updated to Quarter 3 (Q3) of 2011, revealed the following problems with regard to the IC numbers of voters in Sabah:

    1) The same voter being given a new IC number

    2) A voter’s old IC number being given to another voter

    3) Two voters sharing the same old IC number

    4) Voters with the same name and same date of birth registered in the same constituency

     Same voter given a new IC number

    As far as I know, there are no specified procedures for a civilian holding a civilian identity card to change his or her IC number.

    And yet, my preliminary investigation uncovered 63 cases in Sabah where the IC number of a voter in the 2008 electoral roll was subsequently changed. (These are the same voters because the data shows them having the same old IC number).

    And none of these cases involved a change in IC number because of these voters were allocated a number which did not match the voters’ gender – ICs ending with an even number for ‘females’ and those ending with an odd number for ‘males’.

    Some cases involved minor tweaks, including changing the date of birth by one digit, perhaps because of an earlier data input error.

    But there were also many cases where the date of birth of a voter was changed completely. The table below shows some examples.

    For example, Janggok bin Danau’s date of birth as indicated by his IC was changed from May 6, 1961 to Dec 31, 1951. Taib bin Ali’s date of birth was changed from Nov 30, 1970 to March 21, 1959. Ahmad bin Kalanayakan’s date of birth was changed from June 30, 1963 to Oct 9, 1949.

    NONE

    Even though the 2008 IC numbers for these voters are no longer on the electoral roll, this change in IC number is worrying because it could potentially be part of a much larger and systematic attempt to ‘mask’ the trail of giving out ICs to non-Malaysians as part of ‘Project IC’ in Sabah.

    And if this can be done in Sabah, it could easily be replicated in other parts of Malaysia.

    A voter’s old IC number given to another voter

    More worrying is the finding that the old IC numbers of some voters have been recycled and given to another voter.

    My preliminary investigation uncovered 35 of such cases in Sabah. In all of these cases, the old IC numbers have been ‘left out’ in the details provided by the EC website.

    For example, in 2008, Chui Vin Ming (male) with new IC number 390315125155 and old IC number H0269593, was a registered voter in Tawau. But according to the EC website, this old IC number now belongs to Misra binti Idris (new IC: 580614125662) who is also a registered voter in Tawau. (The most recent screenshots of the details of these two voters from the EC website is shown below).

    How can the IC number of one voter be given to another?

    In this particular case, how can it be that the old IC number of a Chinese male voter, who is born in 1939, is given to a female Malay voter, who is born in 1958?

    In addition, why is the old IC number of the Chinese voter, Chui Vin Ming, excluded from his details in the EC website?

    Screenshot of Chui Ving Ming (note that the old IC number is missing).

    NONE

    Screenshot showing Misra binti Idris having Chui Vin Ming’s old IC number.

    NONE

    In another case, the old IC number of Amiri bin Sakka (new IC: 661014125831, old IC: H0534679) who is registered in Kinabantangan was given to Hartini binti Daud (new IC: 690118126030) who is a registered in Tawau.

    Screenshot of Amiri bin Sakka (note that the old IC is missing).

    NONE

    Screenshot of Haritini Binti Daud having Amiri bin Sakka’s old IC number.

    NONE

    In case someone considers the possibility that these could be old IC numbers being given to spouses (if this is indeed legally permissible), included among these cases are those where old IC numbers have been given from one male voter to another male voter and from one female voter to another female voter.

    The table below shows the voter details of some of the cases uncovered.

    NONE

    These are cases where voters whose old ICs have been given to others, but still remains on the electoral roll. I also found cases of two voters who were deleted from the electoral roll after ‘giving away’ their old IC numbers.

    For example, I found a voter by the name of Badariah binti Zabdi (new IC number: 610911125540, old IC number H0509518) who was registered in Tawau in the 2008 GE electoral roll.

    In the Q3 2011 electoral roll, Badariah’s new IC number was changed to 620112125842, but her date of birth in the EC records remained that of her old IC number, which was Sept 11, 1961.

    (I was able to ‘detect’ this case because her date of birth in the EC records did not correspond with her IC number). However, according to latest check of the EC website, the IC number in question – 620112125842/H0509518 – now belongs to Norhayati binti Ismail, whose date of birth has been ‘updated’ to Jan 12, 1962.

    NONE

    Badariah binti Zabdi has now become Norhayati binti Ismail with a new IC number and date of birth. The only thing which unites them is the common old IC number. Badariah’s former new IC number – 610911125540 – no longer exists in the EC database.

    I also found another voter by the name of Zainal bin Sila (new IC: 59051560125447, old IC: H0664360) who was registered in Kimanis in the 2008 GE electoral roll.

    In the Q3 2011 electoral roll, Zainal’s new IC number was changed to 650422125431, but his date of birth in the EC records remained that of his old IC number which was May 15, 1959.

    However, according to the latest check of the EC website, the IC number in question (650422125431/H0664360) now belongs to a Wasimin bin Mosuling, whose date of birth has been ‘updated’ to April 22, 1965. Zainal bin Sila has now become Wasimin bin Mosuling with a new IC number and date of birth.

    Unless both of these voters are part of a witness protection programme, which requires them to change their IC and identity, the changes highlighted look very suspicious.

    Can old IC numbers be transferred from one voter to another? Are old IC numbers being ‘recycled’ and given to ‘new’ voters so as to make them less ‘suspicious’ on paper? These questions can only be answered by the NRD.

    Two voters sharing the same old IC number

    In my preliminary investigation, I also found 21 cases of two voters sharing the same old IC numbers.

    Screenshot of Tawasil bin Omar and Hasdar bin Salem sharing the same old IC number (H0563747).

    NONE

    For example, I found Tawasil bin Omar (new IC: 430306125675, old IC: H0563747), a voter in Sepanggar, sharing the same old IC number as Hasdar bin Salem (new IC: 600625125479, old IC: H0563747), a voter in Putatan (see screenshot above).

    Screenshot of Milah binti Abjah and Amin bin Sulaiman sharing the same old IC number: H0502359.

    NONE

    I also found another example of a male and female voter from different constituencies sharing the same old IC number – Milah binti Abjah (new IC: 680802126134, old IC: H0502359) who is registered in Sepanggar and Amin bin Sulaiman (new IC: 650101125801, old IC: H0502359) who is registered in Putatan.

    NONE

    A disturbing finding is that when these old IC numbers are keyed into the EC website, no entries are detected. Only when these old IC numbers are keyed in under the ‘Semak Isi Rumah’ function do the names belonging to these old IC numbers appear.

    Voters with the same name and same date of birth registered in the same constituency

    Here, I found three cases of voters who share the same name and same date of birth who are registered in the same constituency. While it is possible that people who are born in the same area on the same day may end up having the same name, the case of the two voters named Pentammah A/P Muthaloo stands out.

    These two voters have the same name but different IC numbers (new IC: 541209045018, old IC 8139940 and new IC: 541209025682, old IC: H083889).

    Both of them are born on the same day but in different states. One was born in Malacca (state code 04) and the other in Johor (02).

    But by a great stroke of luck/coincidence, both of them happen to end up in Sabah and registered not only in the same parliamentary constituency of Sepanggar but also in the same state constituency, Karambunai, and in the same polling district of Kurol Melangi and the same locality of Kurol Melangi.

    Screenshot of Pentammah A/P Muthaloo (same date of birth, same locality, same district).

    NONE

    Tip of the iceberg

    The cases identified in this preliminary analysis in Sabah are not isolated cases. More than half of the problematic cases identified (71 out of 130 or 55%) fall into the range of ‘dubious’ IC numbers highlighted in Dr Chong Eng Leong’s book ‘Lest We Forget’ – H288001 to H0384000 and H48001 to H0576000 (pg 21).

    One cannot help but suspect that these cases are part of a much larger set of inter-related problems which arose because of the improper distribution of ICs to non-citizens.

    The distribution of ICs to illegal immigrants in Sabah is not a new story. It is happening to this day as indicated by a recent news report that an NRD official was among the 19 people arrested forissuing fake MyKads.

    If the Royal Commission of Inquiry on Illegal Immigrants in Sabah is one that should be taken seriously, its terms of reference must include an investigation into the issue of ICs which were issued to non-citizens and the number of these non-citizens who found their way into the electoral roll.

    The cases identified here is but the tip of a much larger iceberg.


    ONG KIAN MING is the project director of the Malaysian Electoral Roll Analysis Project (Merap).

    This article was published by Malaysiakini.

  • Dissecting the ETP Annual Report (Part 2): The mystery of the disappearing entry point projects

    The investments enigma. PEMANDU in its Annual Report claims that investments by the private sector were well above target last year. The headline claim may not withstand scrutiny though. Very large entry point projects (EPPs) appear to have faltered. We highlight just three examples here. If they had indeed faltered, which projects stepped up and more than filled their large shoes?

    The shifting sands of LFoundry. PEMANDU gave itself full marks for the completion of construction of this 200mm wafer fab. However, very strangely, elsewhere in the Annual Report, a much less significant RM100 million equipment refurbishment project was showcased instead of this RM1.9 billion fab. The uncharacteristic modesty by PEMANDU led us to do some digging, which suggests that this lab might never have been constructed at all, contrary to PEMANDU’s claim.

    What happened to Damansara City 2 and Marina Island Pangkor? These two EPPs announced last year were perhaps the most important in the Greater Kuala Lumpur/Klang Valley and Tourism NKEAs. But the ETP Annual Report omits any mention of them, focusing instead on modest “heritage trails” in Kuala Lumpur, and Penang, Klang and Kota Kinabalu as the three ports with the most tourism potential.

    PEMANDU’s chimera of perfection. Glossing over issues merely results in a growing gap between reality and delusions of grandeur, and the facade will ultimately come crashing down. Rather than prolonging the charade of infallibility, PEMANDU should be frank and confess to problems, and state the remedial steps it took. This may well help others avoid making similar mistakes and adds much more value to Malaysians.

    Some very large EPPs announced in the ETP Updates last year were strangely omitted in the recently released ETP Annual Report 2011.

    ● These include a RM1.9 billion wafer fab in Kedah, the RM1.9 billion GuocoLand Damansara City 2 project and the RM600 million Marina Island Pangkor Extension .

    ● Did these EPPs hit problems? If they did, PEMANDU should come clean and transparently explain the issues.

    ● Problems are part of the business landscape. PEMANDU would add far more value if it shared its experiences in surmounting obstacles instead of glossing over issues.

    PEMANDU’s unrealistically perfect world  

    PEMANDU in its inaugural Annual Report of the Economic Transformation Programme (ETP) claimed many successes including:

    1. Economic growth being ahead of its target;

    2.72 out of 131 EPPs (entry point projects) taking off;

    3. EPP investments totalling RM179 billion, creating RM130 billion of GNI and nearly 314,000 new jobs.

    Last week, in Part 1 of our series, we gave PEMANDU an A+ for obfuscation, for being less than clear and truthful about its economic growth targets.

    This week, we drill down to Execution — the first E in our DEEDS framework for evaluating the ETP. Acolytes of PEMANDU would surmise that business and economic management is effortless. Hardly a hint of difficulty is ever expressed in PEMANDU’s rhapsodic reports.

    Those grounded in reality will not be surprised to learn that REFSA finds at least two major issues with the claim of entry point project successes:

    1. Some major EPPs announced during the ETP Updates given by PEMANDU last year were strangely omitted in the Annual Report;

    2. A number of projects, including big-ticket projects such as Karambunai Integrated Resort City, Tanjong Agas Oil and Gas Hub and LFoundry Wafer Fab, may not pass muster under close scrutiny.

    Let us start with the wafer-thin foundations of the RM1.9 billion LFoundry Wafer Fab project in the Kulim High-Tech Park.

    The shifting sands of LFoundry 

    The very first entry point project (EPP) stated under the Electrical and Electronics NKEA (National Key Economic Area) is “Executing a smart follower strategy for mature technology fabrication.” In Update 1 on October 25, 2010, PEMANDU said LFoundry Sdn Bhd, a subsidiary of German-based Landshut Silicon Foundry GmbH, would undertake this RM1.9 billion project.

    Subsequently, the ETP Annual Report proclaimed that the “construction of the 200mm wafer fab” had been completed by December 2011 and PEMANDU gave itself full marks for delivering on this EPP.

    Oddly enough, nothing was mentioned in the “Achievements” section of the ETP Annual Report. Instead, a much smaller RM100 million equipment refurbishment and training centre project was highlighted.

    We were very surprised that this astounding execution of completing a wafer fab way ahead of schedule and within just 12 months was not trumpeted. And indeed, we would have supported such publicity as well-founded and a wonderful example of Malaysian construction and engineering prowess.

    This uncharacteristic coyness of PEMANDU in choosing to highlight a much smaller RM100 million “refurbishment” project instead of a spanking new RM1.9 billion wafer fab plant completed in record time spurred us to do more research. We found that LFoundry in Germany is declaring itself insolvent and going into bankruptcy proceedings! In fact, there is no mention of this project on:

    1. L Foundry’s own website; or on

    2. Kulim Hi-Tech Park’s list of tenants.

    Note that L Foundry’s financial woes had been in the news as far back as November 2011. But this fact was never mentioned in the ETP Annual Report published in April 2012 when PEMANDU took “100 per cent” credit for the achievement in constructing a 200mm wafer fab.

    It was only later that Chris Tan, PEMANDU director for the Electrical & Electronics NKEA, revealed the following in the ETP blog:

    “…the German partners ran into operational difficulties … and were forced to pull out. The project as originally envisaged was scrapped … MIDA … shifted to Plan B, and facilitated capacity increases via other companies.”

    Taking Tan’s comments at face value, PEMANDU’s achievements are even more breathtaking. It surmounted difficulties with the original German partners and managed to find “other companies”‘ and still complete a 200mm wafer fab factory all within 12 months!

    The story behind such “remarkable” execution should certainly be shared with all Malaysians. It would indeed help in transforming the economy if PEMANDU were to share its knowledge with all entrepreneurs:

    Who are these “other companies” who stepped in and filled the gap so quickly? Please name them so that we may study and emulate their abilities;

    Better still, please set up a site office and a case study. How was construction fast-tracked? Our contractors might learn a thing or two about project management.

    Or is the truth more prosaic, and the reality is that there is no 200mm 100 per cent completed wafer fab as claimed in the Annual Report?

    We conjecture that PEMANDU gave itself full marks for completion on the basis that while the original projected floundered, it still managed to “facilitate capacity increases via other companies”. We could debate this point further — are full marks deserved if the total investment is less than originally targeted? Furthermore, increasing capacity at existing companies is less valuable than introducing a new player who can broaden and deepen the industry.

    However, there are other pressing issues — such as missing projects. These are EPPs which were proudly presented during PEMANDU’s numerous ETP Updates in 2010 and last year, but which, very oddly, received no mention in the ETP Annual Report released in April this year.

    We shall highlight just two examples — Damansara City 2 and the Marina Island Pangkor extension.

    What happened to Damansara City 2?

    The Damansara City 2 project by GuocoLand (Malaysia) Berhad was unveiled in the 3rd ETP Progress Update on January 11, 2011. This mixed development comprising retail and office blocks and a hotel and service apartment was by far the largest project mentioned under EPP 7: Creating Iconic Places and Attractions in the Greater Kuala Lumpur/Klang Valley NKEA (National Key Economic Area).

    We shall set aside the questions of how “transformative” really are property development projects such as this, as well as the process which resulted in GuocoLand’s proposal being granted EPP status and thus, at least implicitly, being more iconic and transformative than, say, the KL Eco City and Icon City projects by SP Setia and Mah Sing, respectively.

    What is shocking is that this EPP, which at RM1.9 billion is by far the largest project in EPP7 in the Greater KL/Klang Valley NKEA, receives no mention at all in the ETP Annual Report. There was no status report, and in fact, it was not even mentioned in the “Moving Forward” section. Instead three additional heritage routes and the upgrading of Masjid Jamek were highlighted instead.

    Marina Island washed away?

    Moving on from the LFoundry and Damansara City 2 projects on the shifting sands of dry land, we come to seaside projects which may have been “washed away”.

    The Marina Island Pangkor’s International Resort & Entertainment Extension Project was showcased in the 4th ETP Progress Update on March 8, 2011. This “World-Class Integrated Passenger Seaport Transportation Hub and a World-Class Waterfront Development” which “will position Malaysia well into the future” appears to dovetail nicely with EPP6: Creating a Straits Riviera Cruise Playground in the Tourism NKEA.

    Strangely though, no progress update was given in the Annual Report on this huge project which will require RM600 million of investments, and is expected to provide 27,000 jobs and contribute RM9 billion of GNI (Gross National Income) by 2020.

    Instead, the ETP Annual Report points out that the Cruise and Ferry Integrated Seaport Infrastructure Blueprint for Malaysia identifies Penang, Klang and Kota Kinabalu as the three ports with “potential to contribute significantly to the Malaysian cruise industry”.

    Whatever happened to Marina Island Pangkor? The Blueprint, no doubt, was commissioned by the Economic Planning Unit. But surely PEMANDU in its Annual Report should have stated where this important EPP stands in the overall scheme of things.

    Let’s be frank

    Uncertainty and adjustments are part and parcel of the business landscape. It is normal for projects to be varied, postponed or even abandoned. Companies do get into financial difficulties. Some go bust. It would be irrational to expect all the entry point projects (EPPs) under the ETP to progress with smooth precision. Problems are to be expected, which good project managers recognise and surmount.

    Glossing over and ignoring issues as PEMANDU is wont to do is a terrible approach. Plans, assumptions and forecasts must accommodate changing circumstances. Pretending that all is going perfectly to plan merely results in an escalating divergence between reality and delusions of grandeur, and the facade will ultimately come crashing down.

    PEMANDU must be transparent about the EPPs which are facing difficulties. The contribution of these troubled EPPs to investment, GNI and jobs created should be stated clearly and transparently so that shortfalls caused by the affected EPPs and the effects on their respective NKEAs can be addressed and given extra attention moving forward.

    In addition, it is also good practice and would be very helpful to other entrepreneurs if PEMANDU were to disclose what went wrong and the remedial steps taken. PEMANDU’s experience and knowledge gained may well help others avoid making similar mistakes.  This kind of transparent evaluation regarding the execution challenges faced by entrepreneurs and entry point projects was sadly lacking in the ETP Annual Report. The pace of private investments is well behind the ETP targets in terms of the share of private to public investments.

    In the next instalment of this series which will cover Enterprise, the second E in our DEEDs framework to dissect the ETP Annual Report, we shall uncover more evidence showing why the gaudy investment figures highlighted under the ETP should not be taken at face value.

    About this series and DEEDS

    Earlier this year, we published a series assessing PEMANDU and the ETP on the goals, plans and targets stated in the ETP Roadmap document. To facilitate constructive discourse and in keeping with the spirit of the alphabet soup of NKEAs, NKRAs, SRIs, EPPs, and GNI surrounding the entire GTP, we evaluated PEMANDU and the ETP on its DEEDS — Data transparency, Execution, Enterprise, Diversity and Socio-Economic Impact. The 8 Focus Papers in this Critique of the ETP Series, together with related infographics and a powerpoint presentation can be found at www.refsa.org. — REFSA (Research for Social Advancement)

    * Dr Ong Kian Ming holds a PhD in Political Science from Duke University and Economics degrees from the University of Cambridge and the London School of Economics. He is attached to UCSI University, which has been named as the project owner of two entry point projects (EPPs). To avoid any potential conflict of interest, he will not make references to or analyse these two EPPs. 

    * REFSA (Research for Social Advancement) executive director Teh Chi-Chang holds a first-class degree in Accounting & Financial Analysis from the University of Warwick, an MBA from the University of Cambridge and the CFA (Chartered Financial Analyst) charter. Prior to joining REFSA, he headed highly-regarded investment research teams covering Malaysia, and was himself highly-ranked as an analyst. 

    This article was published by The Malaysian Insider.

    Read Dr. Ong’s critiques of the ETP in full here.

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