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

(Also published on The Malaysian Insider)

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.


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. 

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