Saturday, June 6, 2009

Who's planning the economy now?

I had a good chuckle reading Anita Gabriel's piece, Alphabet soup of economic councils, which quite aptly captures the perplexing array of abbreviated agencies that were created and created and created for the purpose of dealing with Malaysia's economic challenges.

If Anita Gabriel is correct, the final name of this body is called the National Economic ADVISORY (as opposed to "Action") Council carrying the bland albeit and vaguely familiar abbreviation, NEAC.

Regardless of the acronym or abbreviation, the NEAC has no members yet. But, it does have a Chairman in the form of Tan Sri Amirsham Aziz (formerly of Maybank and ex-Minister). Is he the right man for the job? Always, there are differing views. He did steer a relatively quiet tenure in Maybank. This is not a bad thing for a bank. And, he also steered a relatively quiet tenure as the Minister in charge of the Economic Planning Unit and the old NEAC. That was a bad thing for a Cabinet member.

Who else is going to join him in the NEAC? I am not holding my breath.

Given the manner in which the Prime Minister has gone about in making his Cabinet appointments and, given the Honours List for the Hari Keputeraan Yang Di Pertuan Agong, one suspects that the NEAC will comprise the usual suspects. Who these "usual suspects" are is not a stretch of the imagination. Check out the previous NEAC members. Check out the previous Economic Council members. Those who are still alive (and, I believe ALL of them are still alive) stand a better than even chance of being in the NEAC.

It certainly gives the impression that the economic planning and strategy talent pool in Malaysia is very, very small. Lots of in-breeding. And, we all should know what in-breeding results in. Dr M had a few paragraphs on in-breeding in his seminal book, The Malay Dilemma.

Don't get me wrong. As a stakeholder who prays every month-end and year-end for the good economic health of Malaysia, I desperately want the Malaysian economy to be planned and managed with the greatest profundity of wisdom and the executed with a high level of excellence, brilliance and anticipatory insight. Perhaps that is why I focus so much on economic matters instead of creating a blog that dwells (or wallows) ad nauseum about the past glories and, erstwhile travails of Leeds United (and, while we're on this, is Liverpool about to join Leeds in the middling depths of the English League One?)

But, I digress....


hishamh said...

The problem is not in the planning. I have to read the annual Economic Reports and Malaysia Plans as part of my job - for the most part, the challenges and requirements of development are pretty well understood by the technocrats and advisors involved (to me at least).

The problem, as ever, is in the execution. Somewhere along the line between setting economic goals and formulating actual policies to achieve those goals, we get lost.

Partly I think the issue is one of policy instruments - the defining characteristic of politicians everywhere is when confronted with a problem to throw money at it. That is not always the best solution, especially with soft subjects like human capital and entrepreneurship development.

The second is the relative lack of relevant research into policy alternatives and effectiveness. I've yet to come across any real research into fiscal multipliers in the Malaysian context, or for that matter sports development programs. While I suspect the government does commission such work internally, the lack of public access and peer review means that ideas aren't vetted rigorously enough.

I've attended one or two "feedback" sessions with EPU and frankly the impression I get is that there is still a great divide between getting from objective to effective policy action.

de minimis said...


I believe you are one person who understands sheer lack of real and serious thinking that is sorely needed for genuine economic planning. I believe the continuing pattern is for the so-called economic planners to put the fate of Malaysia's economic strategies into the hands of consultants like McKinsey, Boston Consulting and fellow travellers. That's not to say that those people don't know what they're doing.

Rather, the concern is manifold.

For one thing, the client must have some idea or vision.

Another is that the client must provide much needed assumptions to augment the template assumptions that these consultants typically offer.

Yet, another, is that the client must take the trouble to read and digest the recommendations.

Furthermore, the client must then get its boys and girls to INTERNALISE the agreed goals, the recommended implementation plan and, put the elements of audit and transparent disclosures into place so that instances of negotiated contracts, marking-up values to line pockets and, passing tasks to parties who are unqualified and uninterested in the actual work are avoided at all costs.

In short, after getting the preceding matters off my chest, I agree with your observations, bro.

hishamh said...

I've never had the experience of working with McKinsey, but had the dubious pleasure of being on a strategy formulation and implementation project with Boston Consulting.

I believe, with regard to c-o-n-sultants, that the most important thing to keep in mind is the first three letters!

etheorist said...

Two points:

1. The economics has been corrupted by the politics - hence, we have to get politicians out of economics.

2. Business school thinking cannot replace ever proper economic thinking - we have to rediscover our comparative advantage - before we try to rebuild our competitive advantage.

de minimis said...

Further insights from the 2 bloggers whose economics knowledge and experience is par excellence. Perhaps the point I should make is that the system of selecting NEAC members is too driven by public profile and, not enough by examing true merits based on technical knowledge of economics and, ability to think strategically and out-of-the-box - even on implementation and execution aspects.

etheorist's point about Business Schools thinking is resonant. The Malaysian government should take this healthy scepticism of the advice, findings and recommendations of consultants.

Real economic thinking, planning and implementation should be done by Malaysians with merit. The foreign consultants (who are well-paid) should only be input and resource people.

The tendency for abdication of real thinking by the Malaysian economic managers and, worse still, hiding behind the BRAND/JENAMA of the likes of McKinsey or Boston Consulting misses the point of economic thinking, planning, strtegy and implementation completely.

walla said...

Mindful that i am in the company of seminal minds, this one to tiptoe by.

There could be reasons for the boutique consulting firms. It could be they are good at synthesis. Also their access to their accumulated and proprietary store of engagement experience in many clients across the globe. Perhaps, their ability to pull in on short notice specialists from all over the world for specific parts of each engagement. Certainly their power-pointing skills with punchy animation. And obvi-ly most of their lady consultants are 'chun'(is that the word?).

Nothing like fresh breezes to pop sleepy eyes of the public sectors of the world fed too long on dry multi-paged reports that don't use those precise but portly key words to create signposts around a problem, giving it form, flesh and fulsomeness. And thus that sense of mental control that generates the feeling that big problems are finally being pruned down to size and everything is going to be organized for once in a way those who had gone up by peter's principle can still understand.

All this, easy. Someone joked that too many public sectors worked like the english army surrounded by angry zulu's. Out-numbered, in a bit of a spot, and about to be charbroiled as bacon, the soldiers pleaded desperately for more bullets. Queue up and fifo, said the quartermaster.

Nowadays things are not that linear but one suspects too many of those who run governments and plan policies are just overwhelmed by the basic trait of modern nation-building: complexity.

And when complex econometric models are presented as thrust rationales, they might just collapse before stamping their decisions by that basis that will affect millions. Let alone their political parties. And all because of excess luggage allowance. Which was why they had left behind in nottingham, buckingham or oxford those notes on economics.

So it should be understandable why people who appear to clarify complex situations in attractive language and structured form can be appealing.

There are possibly other psychosomatic reasons. For instance, the public sector is information-averse. Their data is often out of date (and that doesn't sound right). Worse, they don't have a clue about the outside world. Especially those overseas which arrived here last night.

And that's how we get a situation like this:

I should think that's a valuable interview, full of insights, useful from this blog to the next. However, even to get that link was difficult. If you don't have the title to search but try to find it in the paper's home-page, its search engine doesn't work, neither the way things are arranged, and archiving seems to have stopped. Only to show those who present national information and views are themselves out of sync on what are important for Malaysia.

So, how to 'plan the economy now' if even such simple things are outa whack?

walla said...

It remains to add while fighting for life with a mosquito that cannot be killed by man or insecticide that to form a really effective think tank team requires the right balance.

The fact they have been shoving coal to newcastle with so many acronyms but only recycling the same public figures shows that they haven't got that balance. And the reason is political. So depoliticizing the next national economic advisory stroke action whatever is indeed paramount if we are to avoid reinventing the same trite recommendations that will again be shelved for again the next administration. Until the end of time, or this country's future, whichever the earlier. (art of underselling, here).

You need the economists to be in as the base. Then people who have run agriculture, industry, technology, transport, services and so on. Then people who can transcribe intelligently for three audiences - the decision-makers, the operatives and the stakeholders. Then people who will argue the pants off everyone. But to get to there, you will also need a master conductor of the orchestra inside that body who will milk the minds of everyone for whatever they're worth. We know how it is with people. Even the best experts can't optimize and maximize their contribution at any point of time. They sally in, say a few words, contend and context a bit here and there, press some personal agenda, forget all about being dispassionate about national issues, then leave for tea. There's no sense of coherent progress like what appears from turning slide one by one to one hundred.

walla said...

So, hybridize as much the proceedings of the body as its composition. It should be a no-holds bar gladiators pit, not an assemblage of yes-man accountants or semi-professional political jockeys.

And we have to also be mindful that proceedings are only as good as the data and information before their evaluators. Which means one has to really beef up information and analysis gathering.

Maybe to start, one should first tackle the big question: 'what is a country these days?' and then brave the storm to get a george yeo, or goh cheng swee, or kishor mahbubani, to be guest presenters and create some new flavors to raise attendance. It doesn't matter where they're from. After all they are also protoplasms.

Having said all this when one should be slaking thirst at a beach faraway, with more interesting company than a mosquito, it remains to add one or two points.

If you read the interview above, the first thought would be: how to effect change management from manufacturing to services?

The reason why there has been a shift in contribution from manufacturing to services for the economy is that we have lost our comparative advantage as well to others.

When, for instance, we brush our teeth in the morning, the toothpaste comes from Thailand, not Section 14 Petaling Jaya. It used to be only the flavour came from Thailand. Now they just do the whole tube there. I am invincible, fellow economists. I know the exact cost structure of a tube of toothpaste.

So you ask was the reason for MSC because McKinsey at the behest of TM had inserted one slide that showed if we had continued heavy industrialization we would not have reached developed status?

We then ask the next question. Did we learn the lesson there on what's basic for MSC? If it was human capital, wouldn't human capital be even more telling for the services sector to be the next thrust?

So we didn't learn the lesson. And, considering other looming challenges at the horizon over the next two years, we also seem to be realizing very late this trend about the need to shift from manufacturing to services.

So it remains to ask: is there more than information gathering in the government sector? For instance, a unit which tracks and raises the alarm bell on trends, perhaps egg everyone to pay attention to what's happening around the world that will impact us before we start realizing it only after watching cnn when it's then already history in this fast moving world?

It's more than forming a cozy national economic advisory stroke action whatever.

Where is the human capital we need two years ago to do the things we need to do now in order to raise the services sector tomorrow?

(that's a major undersell, ;P).

walla: 0; mosquito: 1