Response to Lee Hwok Aun's 'The 11MP is resting on flawed foundations' — Economic Planning Unit

MAY 25 — This is to respond to the article “The 11MP is resting on flawed foundations” by Lee Hwok Aun that appeared in the Malay Mail Online on May 22, 2015.

One, it is international convention to report GNI per capita in current terms when international comparison across countries is involved. Currently, the World Bank minimum threshold of a high-income economy is US$12,726 (RM45,991) in current terms using the Atlas method (see World Bank definition of GNI per capita at http://data.worldbank.org/indicator/NY.GNP.PCAP.CD). The threshold for a high-income economy in 2020 is estimated using the historical growth trend of the threshold income itself. Applying this approach, the threshold income for a high-income economy in 2020 is estimated to be about US$14,700. On this basis, the Eleventh Plan uses US$15,000 as the threshold.

Two, with respect to the high-income threshold of US$15,000 stated in the NEM, it is meant to be in nominal terms as per international convention. The GNI per capita target for 2020 in the NEM was US$17,725, based on average GDP growth of 6.8 per cent per annum, is now outdated. The GDP data used in the NEM was based on 2000 prices, whereas the GDP data has since been rebased twice to 2005 and 2010 prices. The targets in the Eleventh Plan are set based on 2010 prices, which reflect the current structure of the economy. The GDP growth estimate of 5-6 per cent p.a. for 2016-2020, inter-alia, reflect the current global economic condition, the relatively low commodity prices and the exchange rate.

* This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail Online.

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