Country in a hurry

The Selangor Times, Issue 21, 22-24 April 2011

We are a country in a hurry; we want high-income status by 2020. We are also a KPI-driven nation; we speedily devise and monitor a litany of key performance indicators. And we are an ambitious lot; we set high targets and want fast results.

There’s nothing wrong with aspiring for higher income better material conditions, or setting quantifiable targets and striving to meet them. But in our haste to claim the trophies we have projected as a future inheritance, or under pressure to deliver on lofty KPIs, we lull ourselves into an alternate reality where the status matters more that the income, impression trumps knowledge, and new indicators of development misinform or trivialize the problems at hand.

I am really perplexed. What does high-income status mean and at what exactly rate will we get there?

The ‘old’ metric of economic growth, Gross Domestic Product (GDP), has given way to Gross National Income (GNI). The magic number is US$15,000, or RM48,000, per capita by 2020. Actually, there is just a minor difference here, even though replacing the word product with income suggests that the indicator is a better reflection of well-being. GDP is not very different from Gross Domestic Product (GNP), which is basically the same as GNI.

Call it GNI, but we still sum up the amount produced, dividing it by the population, then assume this captures what the average Malaysian actually receives as income.

In international comparisons, GNI per capita can serve as a convenient means for demarcating low income, middle income and high income countries, and the average differences in living standards across these categories are stark enough.

But when analyzing development in one country over time, it is equally if not more important to look at the level and distribution of workers’ earnings.

In 2009, 56.4 percent of workers earned less than RM1500 per month, according to the Economic Transformation Programme. By 2020, that figure will be reduced, but to a still sizable 43.2 percent. Seriously, we’re going to call ourselves a high income nation when almost half the working population earns RM1500 a month? However frugal one tries to live, that’s not much.

How will we get to $US15,000 per person? The mantra wafting around is 6 percent annual growth until 2020 will deliver the Malaysian economy to that level, from US$6700 in 2009. Actually, 6 percent increase per year will raise average income to US$12,719 in 2020.

Secondary school mathematics is enough to calculate that it will take annual growth of 7.6 percent to reach the high-income threshold. This basic error dumbfounds me. That it shapes our national development template testifies to appallingly sloppy, fantastically delusionary or willfully deceptive policy analysis.

Is it just a computation mistake, or a mentality that statistical faith matters more than truth, or a packaging strategy to sell a growth rate that we would find more palatable?

I don’t know, but what I do know is that the 6 percent story is false – yet this is the basis for charging toward high-income status.

Intertwined with the goal of raising income, of course, is the alleviation of poverty, especially hardcore poverty. The current zeitgeist, of course, is not content with that as a KPI. We want zero hardcore poverty, and that was supposed to have happened by end 2010.

And we made it, apparently. On March 28^th, it was reported that 44,600 extreme poor households (98 percent!) were “removed from the category”, all in the space of last year. Unlike in the past when we measured poverty by sampling the whole country and getting some estimate, we now have impressively precise numbers. The new way of counting the poor is to tally the number registered with the e-Kasih programme under the Women, Family and Community Development Ministry.

The assistance offered to the poor surely benefited them in some way. But having met the KPI of zero poverty, the government should explain further how such phenomenal progress was made. Data indicate that between January 2010 and October 2010, 22,753 were departed from the hardcore category, and another 21,890 left in the last three months of the year. A parallel report on Sabah revealed that in the last three months of 2010, RM7.3 million was disbursed through the ‘temporary allowance programme’. There seems to have been a lot of payments to registered poor folks in the latter part of the year. Does this have anything to do with meeting KPIs?

More importantly, does striking households off the list, especially through temporary allowances, amount to sustainable poverty reduction?

Fundamental flaws in this data must also be highlighted. The credibility and relevance of data obtained through voluntary participation is supremely inferior to the established approach of randomly sampling every district to obtain nationally representative data. The e-Kasih registry conceivably provides information biased toward more IT-connected areas, or communities where neighbours encourage each other to sign up. Using this data, instead of national household surveys, to detect the poor and formulate policy risks marginalizing the poor who are out of reach.

Trouble is, nationally representative surveys and comprehensive evaluations cannot be done in a flash.