Pemandu said the relative novelty of the GNI concept led to errors in its initial application. — File pic
KUALA LUMPUR, July 6 — The original gross national income (GNI) projections of Economic Transformation Programme (ETP) were slashed due to erroneous assumptions made during the initial estimates, said Pemandu today.
This comes after the ETP Annual Report was criticised by opposition-linked think tank Research for Social Advancement (Refsa) for not providing sufficiently detailed explanations for the large reductions in GNI impact and job creation of ETP projects.
Refsa said in a statement yesterday that, in the annual report, RM107.7 billion of gross national income (GNI) and 75,000 jobs equivalent to 45 per cent and 20 per cent of the respective original forecasts were “written off”, which they said raised questions about the level of due diligence exercised during the original forecasts.
Today, the government’s performance management unit said that the revision of the investment and job creation numbers is primarily due to changes in business plans over the next five years as well as shifts in the trade environment.
It also said the GNI forecasts were affected by mistakes such as unrealistic growth rates, the conflation of GDP with GNI, and the use of revenue to denote GNI.
“Being a relatively new concept, most corporations struggled with it,” said Pemandu, referring to the fact that the GNI forecasts are formulated together with input from companies involved in the ETP’s entry point projects (EPPs).
Pemandu said that GNI is defined simply as income of Malaysians, and it is the nation’s net GDP after corporate and personal repatriations, giving a better measure of actual income.
It said that during the original forecasts, errors included using revenue as GNI without stripping out cost, inaccurate projections due to unrealistic growth rates and assuming GDP equated to GNI without taking into account that some corporations such as subsidiaries of multi-nationals or companies in joint ventures with foreign companies, repatriate a substantial amount of their profits.
“Similarly, in calculating job creation numbers, there have been exceptions and revisions,” said Pemandu.
“For example, while we focus on new job creation, several projects involve the expansion of existing plants or production lines and the existing workforce was not discounted. This has since been corrected.”
It added that in order to avoid “spurious conjecture”, it wanted to categorically state that the investment value of the MRT has not changed and once it is fully awarded the actual cost will then be announced.
Pemandu said that the decision to release the amended figures was voluntary and where exceptions are discovered, the data is amended and made public.
It also stressed that the ETP is a living document that undergoes changes to fit changing circumstances and that the NKEA (National Key Economic Area) teams and their counterparts in various ministries and agencies strive to be as dynamic as possible.
“In some cases further refinement has resulted in greater GNI projection,” said Pemandu.
“As an example, under the Healthcare NKEA a lab was run for the Medical Devices Business Opportunity which was then converted into seven new EPPs. Their combined GNI was appreciably higher than that of the original Business Opportunity.”
The ETP is an initiative by the Najib administration to lift the country to high income status by 2020 partly by increasing GNI through new EPPs.
By Lee Wei Lian