Effective States and Engaged Societies:

Capacity Development for Growth, Service Delivery, Empowerment and Security in Africa

A Country Study Used for Comparative Purposes: The Case of Malaysia

Draft Report, June 03, 2005

Prepared by Kathleen Lauder and Norma Mansor

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Table of Contents Pages List of Acronyms 4

1.0 Introduction 6

1.1 Background and Purpose of the Malaysian Country Study 6

1.2 Methodology 6 1.3 Contents 7

2.0 Capacity Indicators: A Snapshot of Capacity Building in Malaysia 7

2.1 State Effectiveness 7

2.2 Inclusion and Social Engagement 9

2.3 Human Capacity 10 2.3.1 Education Indicators 10 2.3.2 Health Indicators 10 2.3.3 Poverty Indicators 11

2.4 Security 11

2.5 Aid Effectiveness and Dependency Ratios 12

2.6 Summary (Individual, Organizational, Institutional Capacity) 13

3.0 Trajectories and Accountabilities 13

3.1 The Trajectory of Capacity Building since Independence 13

3.1.1 Introduction 13 3.1.2 Key Turning Points (Political, Economic, Social) 14 3.1.3 Critical Decisions and Drivers of Capacity 19

Development 3.1.4 Stakeholder Involvement 21 3.1.5 Donor Involvement and Aid Modalities 22

3.2 Checks and Balances 22

3.2.1 Formal Constitutional and Political Checks and 22 Balances

3.2.2 Domestic Accountability Systems 23

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3.2.3 Monitoring and Evaluation by Government of 23 National and Local Capacity Development

3.3 Summary: Tracing the Trajectory of Capacity 23

Development in Malaysia 4.0 Lessons Learned from the Malaysian Experience for Capacity 24

Development in Africa.

4.1 Setting a Positive Trajectory 25 4.2 Strengthening Accountability for an Effective State 26

4.3 Operational Improvements in Programme Design 26

4.3.1 Use of Consultative Committees in 27

Budgeting and Planning

4.4 Managing National Capacity Development 28

Programmes

4.5 Improving Aid Management and Donorship 28

4.6 Targeted Use of Monitoring and Evaluation. 28 Tables 29 Appendices Appendix A Interview Guide 41 Appendix B Lists of people interviewed 43 References 46

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List of Acronyms ADB Asian Development Bank ASEAN Association of South-East Asian Nations ASN National Unit Trust DAU Development Administration Unit EPU Economic Planning Unit FMM Federation of Malaysian Manufacturers GERAKAN Parti Gerakan Rakyat Malaysia HICOM Heavy Industrial Corporation of Malaysia IAG Inter Agency Group IDB Islamic Development Bank INTAN National Institute of Public Administration IMF International Monetary Fund IOG Institute on Governance ISA Internal Security Act LDP Liberal Democratic Party MACC Malaysia Australia Colombo Plan Commemoration MAMPU Malaysia Administrative and Planning Unit MARA Majlis Amanah Rakyat (Council of Trust for Indigenous People) MAS Malaysia Airline System Berhad MBC Malaysian Business Council MCA Malaysian Chinese Association MCS Malaysian Civil Service MDG Millennium Development Goals MIC Malaysian Indian Congress MIDA Malaysian Industrial Development Authority MITI Ministry of International Trade and Industry MTCP Malaysia Technical Cooperation Programme NDP National Development Policy NEAC National Economic Action Council NEP New Economic Policy NPC National Productivity Corporation NVP National Vision Policy ODA Official Development Assistance OPP1 Outline Perspective Plan 1 OPP2 Outline Perspective Plan 2 PAC Public Accounts Committee PBB Parti Pesaka Bumiputera Bersatu PBDS Parti Bangsa Dayak Sarawak PBRS Parti Bersatu Rakyat Sabah PBS Parti Bersatu Sabah PNB Permodalan Nasional Berhad PPP People’s Progressive Party PSC Parliamentary Select Committee SAPP Sabah Progressive Party

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SIRIM Standards and Industrial Research Institute of Malaysia SPDP Sarawak Progressive Democratic Party SUHAKAM Human Rights Commission of Malaysia SUPP Sarawak United People’s Party UMNO United Malays National Organisation UN United Nations UNDP United Nations Development Programme UNFPA United Nations Population Fund UPKO United Pasokmomogun Kadazandusun Murut Organisation

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1.0 Introduction

1.1 Background and Purpose of the Malaysian Country Study

Capacity is the ability of people, institutions and societies to set and achieve objectives, perform functions and solve problems. It involves skills, incentives, organizational structures, resources, and an enabling environment. The ultimate goal of capacity development is to support the development of better skilled and oriented individuals, more responsive and effective institutions, and a better policy environment for pursuing development objectives. The World Bank has launched an Operational Taskforce on Capacity Development in Africa to review and update the Bank’s approach to helping develop the capacities of African states and societies to secure the economic and social fundamentals of poverty reduction. The taskforce is focusing on the practical and operational challenges of improving the responsiveness, efficiency, and efficacy of Bank support for Africa’s ongoing capacity development efforts. It is expected that such improvements would also serve as a catalyst for the larger international effort to scale up support to capacity development in Africa. The work of the task force includes an analysis of the trajectory of capacity development through several African country studies. In order to provide some perspective on those studies, two countries outside of Africa have been selected for study, one of which is Malaysia. The purpose of the study in Malaysia is to understand the trajectory of capacity development; the approaches and strategies which most contributed to Malaysia’s capacity development; the impact of those approaches on institutional endowment and related development outcomes such as service delivery, empowerment, investment climate, and the relevance of this experience for Africa.

1.2 Methodology

The Malaysian country study was undertaken through a literature review and data analysis1 of capacity development in Malaysia, followed by intensive interviews with eleven leaders in Malaysia.2 Interviewees were selected based on their depth of experience over time with Malaysia’s approach to capacity development and their ability to critically analyse events and factors underlying the process and impact of capacity development. A critical factor in selection of interviewees was to obtain a range of perspectives from leading actors and thinkers in government, the private sector, civil society and academia at both the national and state levels. In order to stimulate discussion and analysis from interviewees some were interviewed together through a workshop approach. A draft report was prepared based on the literature review and 1 See bibliography for a complete list of literature reviewed and data sources. 2 See Appendix A for the interview guide and Appendix B for the list of people interviewed, their contact information and the date of interview.

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interviews. This report is being circulated for comment and feedback to all interviewees. Their feedback will be reflected in the final report.

1.3 Contents The report starts by providing a snapshot of capacity development in Malaysia, highlighting achievements over time. It discusses capacity development in four main periods:

• from independence in 1957 to 1969 when the New Economic Policy was introduced;

• from the introduction of the New Economic Policy (NEP) in 1970 to the election

of Dr, Mahathir as Prime Minister in 1981;

• from the launching of the New Development Policy (NDP) in 1991 to the economic crisis in 1997; and

• from the post crisis period, from 1998 to the present.

The report reviews capacity from the perspective of state effectiveness, social engagement, individual, societal and institutional capacity.

The main body of the report tells the story of capacity development in Malaysia. It describes the context at independence and outlines key turning points. It describes how capacity development was influenced by economic and social factors and it describes the role played by various stakeholders.

The report goes on to discuss how various accountability systems, checks and balances were introduced and developed over time, and the role they have played on capacity development. Finally, the report summarizes lessons learned in Malaysia, which may be of relevance to capacity development in Africa.

2.0 Capacity Indicators: A Snapshot of Capacity Building in Malaysia

2.1 State Effectiveness

The success of Malaysia’s policy and programmes geared towards capacity development can be determined by a review of the existing socio-economic reports and policy documents. Based on the report on Malaysia’s Millennium Development Goals published in January 2005 (UNDP 2005), the major state policies have been evaluated as yielding positive results, as most objectives have been met, (Refer to table 1.0 and 1.1). The macroeconomic scenario provides evidence of positive outcomes of some of the major policies. An evaluation of the national policies and plans of action from the first to the

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eighth Malaysian Plan also produces impressive results. Both federal and state governments have demonstrated the ability to formulate sound development policies, set priorities and implement such policies within the given period. Key achievements are indicated by government’s ability to maintain economic growth over three decades except during the economic crisis of 1985 and the Asian financial crisis of 1997/98. The National Vision Policy (NVP 2001-2010) target was to reduce poverty to 0.5% by 2005, (EPU, 2004). By 2002, poverty was reduced to 5.1%.from 16.5% in 1990. (See Table 1.1). The World Bank also ranks Malaysia high on government effectiveness as shown in Table 1.2. When Malaysia gained independence in 1957, a major task of development was to integrate the population, especially the indigenous segment, into the modern economy as quickly and efficiently as possible. This was seen as a sine qua non for nation building. In addition, being a multi-ethnic, multi-religious and multi-cultural society, continued social and political stability was crucial for the achievement of Malaysia’s development objectives. Peaceful co-existence among the various ethnic groups was essential to ensure that the development efforts continued unhindered. The philosophy underlying Malaysia’s growth is that it is not pursued as an end in itself. Growth has always to be accompanied by equitable distribution so that all segments of society could benefit from this growth process. Malaysia has thus undertaken to achieve rapid and sustainable economic development as this will provide a larger volume of resources for social development. Through the years, with the integration of social and economic development in the overall development agenda, there was already in existence a strong social infrastructure network that was able to reduce the impact of the 1997 financial crisis on the population. With the onset of crisis, the Government ensured that the implementation of social development programmes were not affected by continuing to provide sufficient budgetary allocations and further strengthening the delivery mechanisms for the provision of social services. Allocations for social programmes were instead increased to minimize the impact of the crisis on society.Today the Malaysian economy is among the fastest growing economies in South-East Asia with an average growth rate of 7% before and 5% after the financial crisis. (See Table1.0). In the late 80s, through the Malaysian Incorporated concept, the Government encouraged private sector participation in its development efforts, to maintain macroeconomic stability, growth and competitiveness in the key sectors of the economy. This contributed towards the promotion of information technology, enhance human resource development, provide Industrial Training Institutes for skill enhancement, improve quality of life and address social issues jointly in order to achieve sustainable development. To redress the economic imbalance between states in Malaysia, the federal government gives grants to state governments to achieve a more balanced development among states. This allocation takes into account the current status of development, potentials for growth, resources availability and implementation capacity of the states.

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2.2 Inclusion and Social Engagement

Malaysia is ranked slightly below average by the World Bank on ‘voice and accountability’(see Table 1.4) A World Bank report on Consultative Mechanisms and Economic Governance in Malaysia (World Bank 1999) claims that only Non-Governmental Organizations (NGOs) that are not very critical of the government operations tend to be recognized and accepted as partners of development. Hence, civil society operates in a rather restrictive environment. These restrictions are outlined in a number of Acts including the “Society’s Act, the Police Act, Internal Security Act (ISA), University Colleges Act, and the Printing Press and Publication Act”, (World Bank 1999, p.8). A study reported in Strengthening Social Policy (IOG 2004) wrote that government often label NGOs that are critical of its operation as ‘irresponsible’, and establishes parallel agencies to counter or minimize their impact. The interviews also revealed that, the Malaysian media is also criticized as being largely controlled by the government. As such, a critical tool for inclusion and social engagement is limited. On the other hand, many government policies and programmes are geared towards social inclusion and engagement. Some are over four decades old. Many of these policies stem from Malaysia’s cultural diversity. Malaysia has three main distinct ethnic groups: Chinese, Indians and Malays. The political structure is such that power and authority are distributed along ethnic lines giving more political advantage to the Malays, who comprise the majority. The Chinese on the other hand enjoy economic advantage. It is therefore not a surprise that racial conflict erupted in 1969 among these ethnic groups. In response to the racial riots, the government introduced various affirmative action programmes under the National Economic Policy (NEP) to eradicate poverty and eliminate the association of race with economic function (Mansor 1996, p.15). A quota system of recruitment was formed to represent the different racial components and uplift the status of the Malays who were lagging behind in the economic advancement. Yet the ‘Merdeka compromise’3 and the resulting affirmative rights of the Bumiputeras4 have become a controversial issue in Malaysian politics. One writer describes the system as a “a double edged political system, offering prospects of popular participation in public life and at the same time limiting the scope of participation in order to contain conflicts which may challenge the underlying capitalist system or state itself”(Khoo 1997, p.7). However, a ‘consociational’5 power sharing, characterised by the protection of minority 3 The political bargain set at independence to give the Malays special rights and privileges in return for citizenship of the migrant ethnic groups; the Chinese and Indians. 4 The indigenous or native people of Malaysia, known as the Malays. They comprise the majority ethnic group are virtually all Moslems. 5 Based on the concept of “consationalism” [: an approach to power sharing characterized by grand coalitions, proportional representation, cultural autonomy or federalism, and the mutual veto. It comprises a very broad range of political options for setting ethnic conflicts and promoting inter-group moderation and compromise. (http://www.beyondintractability.org/m/power_sharing.jsp)

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rights and decision making by consensus among the ruling coalition that represent different ethnic groups has worked reasonably well. Another factor, which underlines Malaysia’s approach to inclusion and social engagement, is its quest for poverty eradication, which runs through all the nation’s development policies. To realize this objective, the Government has been working in collaboration with the private sector since the early 1980s. Towards the end of the 1980s and the 1990s NGOs have been brought on board to contribute to policy making. While government places certain barriers against advocacy-oriented civil society groups, it appoints representatives of cooperative NGOs to many government boards and bodies. Recently there has been an increasing pressure on government to accommodate civil society groups due to the emergence of the human rights, gender, religious and consumer movements, (World Bank 1999). Moreover an alternative media has emerged in the form of electronic newspapers, such as ‘Malaysiakini’, which are widely read and which report freely. Electronic newspapers are now reaching a broad range of the population and are being produced in Malay, Chinese and Indian languages.

2.3 Human Capacity

2.3.1 Education Indicators: Education has been a high priority of the Malaysian government since independence and it has contributed to the development of its human capital. Government expenditure on education constituted an average of 17% of total budget expenditure from 1970 to 2000, which has increased to an average of 25.7% in 2004 to meet the higher demand for education. It constitutes the 2nd or 3rd largest allocation of the annual total government expenditure. (See Table 2.0). In 2005, Malaysia achieved 92.8% school enrolment rate for children in primary school, 86.1% in lower secondary and 74.3% in upper secondary school. With this achievement, the literacy gap and enrolment rates between boys and girls aged 15 to 25 has been significantly reduced. Primary and secondary school enrollments have been on a steady increase of about 17%. (See Tables 2.0, 2.1 and 2.2). There has been an increase in student/teacher ratio. Enrollment for children with special needs or learning difficulties has also been on a steady increase of approximately 10% with student/teacher ratio of 4.4 in 2000 compared to 4.9 in 1996, (UNDP 2005). The number of pupils in the institutions of higher learning has increased by more than 100% since 1990, and the registered number of doctors and engineers almost doubles for every ten years. (See table 2.3).

2.3.2 Health Indicators: Health indicators in Malaysia also demonstrate effective capacity development. Infant mortality rates have been reduced by 85% over the period of 1970 to 2000. In 2004, the mortality rate dropped to about 6%. This is due the increasing level of awareness on nutritional and health issues among the communities as part of the pro-poor strategies and national anti-poverty programmes in addition to development of health care systems, (UNDP 2005). (See Table 3.0). Hence, the government’s investment in education had

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paid off, however, less than 10% of the Federal government expenditure goes to health. (See table 3.1). Maternal mortality also declined by 40% from 1970 to 1980 but began to rise slightly from 1998 and 1999, mainly due to an improved reporting and enquiry system. The maternal mortality rate eventually remained constant at 0.3 per 1,000 live-births in 2002 and 2003. The improvements in health status are attributed mostly to the government’s investment in the health sector, although less than 10% of the Federal Government expenditure goes to health (See table 3.1). Health care personnel including traditional birth attendants continuously receive training on maternal care to upgrade their skills. Federal government also gives incentives in the form of “critical allowance” to health personnel dealing with critical and demanding cases, (UNDP2005). Again as part of the poverty reduction programme, the control of infectious water-borne and air-born diseases has been a government agenda. In fact, the number of reported cases has drastically declined and small pox has been completely eradicated. Malaria is no longer a major threat. However, the rate at which non-communicable disease has been reported as the cause of death has increased from 24% in 1970 to 40% in 2000. Reported cases of HIV infection dates from 1986. In 2003, 58,000 cases were reported, which amounts to less than 1% percent of the population. However, HIV is still on the increase, 80% of the victims being youths between 20 to 39 years of age, (UNDP 2005). HIV is more prevalent among men than women. 75% of the modes of transmission are through drug abuse. Due to the serious nature of the cases, an AIDS management programme is being introduced to help those infected through counseling and therapy. A National Technical Committee is also set up to work closely with government in advising on policies issues and programmes to combat HIV/AIDS. The overall quality of life, however, has improved with life expectancy at 70.4 for men and 76.2 for women in 2004 from 63.5 for men and 68.2 for women in 1970.(See Table 3.2)

2.3.3 Poverty Indicators: The Malaysian government has made poverty eradication a priority since independence. Poverty eradication is the driving force behind the New Economic Policy of 1970 and the National Development Policy of 1991. The poverty rate has been reduced immensely from 49.3% in 1970 to 5.1% in 2002 among households, (EPU, 2004). This has been achieved through rapid economic growth and the implementation of anti- poverty and pro-poor programmes throughout the country as well as providing major investment in education at all levels. The unemployment rate has reduced from 8% in 1970 to 2.5% in 1996, but drastically increased during the financial crisis of 1997/98. The rate started to decline again during the post crisis period but less significantly.

2.4 Security Maintaining social and economic security is a state mandate. The greatest threat to security in many developing countries is poverty. Malaysia has a history of socio-economic and political stability that has created room for macro-economic development,

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which in turn provides a strong foundation for security. Malaysia’s success in poverty eradication contributes to maintenance of political, economic and social security. Over the past decade, the social life of the people and the security of local businesses have been threatened by increasing crime rate and public complaints about the level of corruption in the police force. (See tables 6.0, 6.1 and 7.0). In response to this in 2004, the government set up a Royal Commission of Police to enhance the operation and management of the Royal Malaysian Police in accordance with the Commission of Inquiry Act of 1950. The Commission’s report, which was published in May 2005, highlighted, among other things, the increasing crime rate from 1999 to 2004 and documented instances of corruption. Among the recommendations given by the commission are improvements in logistics, human resources, housing and training for the police force. Members of this commission reported that they were given a free reign and good government support throughout the inquiry. Moreover, the report was released to the public, without censor, within two weeks of its submission to the government. The way in which this commission was conducted and the transparency to the public indicates a commitment by the government to enhance the effectiveness of security.

2.5 Aid Effectiveness and Dependency Ratios The Economic Planning Unit (EPU) was vested with the responsibility to coordinate and manage projects funded by foreign aid. The unit has carried out this function effectively focusing on priority issues. Aid has been utilised effectively through public-private sector partnership in the planning, implementing and monitoring of development projects particularly in the infrastructural, energy and industrial sectors, (UNDP 1995). Malaysia started to receive foreign aid right after independence. In the absence of sufficient domestic resources to finance development project, the total aid received continued to increase from RM 2.6 billion (1971 to 1975) to about RM 20 billion in 2000. 90% percent of the aid has been in the form of capital assistance, (See table 4.0) and only about 10% amounted to technical assistance. Whilst capital assistance was directed to financing development projects, technical assistance contributed in the development of expertise in project planning, implementation and technology transfer. Towards the end of the 1980 aid was directed from poverty reduction to facilitating the economic growth. The total amount of aid from 1970 amounts to roughly RM 50 billion, which constitutes 27% of the development allocation for the 8th Malaysian Plan, (UNDP 1999). The major sources of capital assistance were from multilateral agencies namely, the World Bank (WB), Asian Development Bank (ADB) and Islamic Development Bank(IDB). They have also provided some form of technical assistance in the policy areas, particularly on macroeconomic development. Bilateral sources of technical assistance have been mainly from Japan.

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The United Nation’s Development Programme (UNDP) opened its Malaysian Branch in 1973 and United Nation’s Population Fund (UNFPA) the following year. Both agencies contributed to Malaysia’s five-year development plans by providing technical assistance and grants for population, family planning and reproductive health programmes. Today UN gives assistance on a cost-sharing basis with the government to enhance national capacity development and enhance environmental management, intellectual property rights, industrialisation, rural and agricultural development. (UNDP 1999). Other forms of technical assistance are in the form of scholarship packages such as the Colombo Plan, which dates as far back as 1951, and other scholarships offered by foreign donors such as the Ford Foundation and the Malaysia Australia Colombo Plan Commemoration (MACC) Scholarship6. They also give scholarship to cover a wide range of subjects.

2.6 Summary (Individual, Organizational, Institutional Capacity)

As discussed above and documented in the tables, Malaysia ranks relatively high on state effectiveness and average on inclusion and social engagement. Malaysia has enjoyed comparatively steady economic growth and has taken measures to distribute that wealth relatively equitably, especially among the three dominant races. In terms of building of capacity of individuals, there has been a significant investment in education and Malaysia has a good record of accomplishment in this area. Malaysia’s achievements in terms of capacity building of organizations may be indicated through the achievements of its educational and health care systems and its record of accomplishment at poverty alleviation, which are also impressive. Malaysia’s achievements at the institutional level are mixed, with some weaknesses in inclusion and social engagement, and other strengths at mechanisms for dialogue and representation in the planning and development of policies. 3.0 Trajectories and Accountabilities

3.1 The Trajectory of Capacity Building since Independence

3.1.1 Introduction

Economic development became the focus of the indigenous independent government in 1957. Just like any country that share a similar political history, Malaysians’ expectation of an ameliorative post-colonial government left the new government with no other option but to come up with strategies for development. Since then efforts in developing 6 The plan funded training in a variety of areas including agriculture, education and public health.

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capacity has evolved over the years as portrayed in the Malaysian development agendas/plans, which can be categorised into four phases as follows:

• Phase One: 1957 – 1969 (the 1960s) • Phase Two: 1970 – 1981 (the 1970s) • Phase Three: 1982 – 1997 (the 1980s and 90s) • Phase Four: 1998 – 2005 (the 21st century)

One of the biggest advantages of Malaysia in building its capacity was its inheritance from the colonial government of an efficient and dynamic civil service. It also inherited a decentralized federal government system (although it is center dominated), which made it possible from the early days of independence to broaden the scope of capacity building within states. Having gone through a smooth transition, as revealed in all the literatures, the newly independent Malaysian government kicked off with capacity development initiatives giving more weight to public sector development or personnel management at a time when local capacity was poorly rated. The colonial government for over a decade had to struggle with threats of communism. This was a backbone to the formulation of the first development policy, which focused on strategies to bring about national development and hold the fabric of the society in the context of the threat of communism. The government of the day deemed it necessary to first concentrate on the public sector, which was then regarded as the engine of growth. Hence, the beginning of the ‘Malaysianisation” of the public sector. These developments were made possible by the vigilance of the elites who formed the Malaysia Civil Service (MCS). The tradition of professionalism and neutrality of the MCS (following the legacy of the British Civil Service) had contributed to the success of the independent government to develop Malaysia. (Expressed by interviewees). The private sector and NGOs have now become the centers of attention given the changing role of the state and its quest for good governance. Capacity development has now assumed a different dimension and the public sector is no more regarded as the sole engine of growth. Instead, Malaysia is building public-private partnerships upon the launching of Malaysia Incorporated Policy introduced by Dr Mahathir, advocating rapid growth of industrialization and the aspiration to become a developed nation by the year 2020. This change of outlook on development priorities has more or less influenced the formulation of government policies over the years. Capacity development has come with it success stories as well as tribulations along critical periods and turning points of the nation’s history which are described in section 3.1.2 below.

3.1.2 Key Turning Points (Political, Economic, Social) Phase One: 1957 – 1969 This phase could be appropriately termed as the alliance phase or the modernisation period. Commencing in the early 1960s, the goal set by the newly independent state was to modernise through the implementation of various development projects. This was

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facilitated by the introduction of the Red Book System7 for rural development, shortly followed by the Esman-Montgomery report8 on administrative reforms for public servants. The main objective of the rural development projects was to “upgrade the standard of living of the rural folk to be on par with that of the urban population,” (Ahmad, Mansor, and Ahmad 2003, p.221). Rural development was used at that time as a strategy to fight against the spread of communist ideologies, which were infiltrating Malaysia well before independence. To prevent the local people from sympathising with the communists, government sought to satisfy them by providing basic services and amenities. By this time, communism, which ended in 1959, was no longer a threat but the course for rural development continued. In addition to this, government utilized the Red Book system to enhance quick service delivery through the mobilization of human and other organizational resources by building partnerships with the local people who where not equipped with sufficient knowledge and skills to make an effective contribution. Since capacity during this period was rated low, the government therefore, focused on developing individual capacities to enhance economic development. There was “the need to balance the great expectations against limited capacity,” (Esman, 1972), since most innovative work was being handled by foreign expertise and a bulk of wealth was owned by foreigners. This was a threat to sustainable development and the government recognized that it must be addressed quickly. Henceforth, the First Malaysian Plan (1966-1970) was introduced. Esman Montgomery Report also brought about the establishment of the Development Administration Unit (DAU) responsible for modernization programmes in planning, budgeting, financial management, personnel management, and local government administration. The effort to build capacity of individuals was first directed towards educating the Bumiputeras and training civil servants in collaboration with the University of Malaya. There was also an attempt to eliminate bureaucratic red tape and political interference that were characteristic of the service by then. Intensified professional training for civil servants both locally and overseas became a state priority rather than the option of on-the-job training. Training programmes included, graduate studies in development administration for post-entry Malaysian Civil Servants (MCS), professional training for mid-carriers, in-service training for technical and clerical staff and periodic staff seminars for top ranking officers, (Esman 1972, p.144). This was achieved by expansion of the training budget and technical assistance from foreign experts. Management of racial conflict, harmonizing politics with administration and strengthening personnel management were high on the agenda. In summary, development administration was the key to growth, and was achieved through institutional building and technological means with greater emphasis on developing individual capacities. Phase Two: 1970 – 1981

7 Adapted from the British military system and used to enhance administrative capability to respond to quick results (emergency) in the implementation of the rural development programme. 8 Highlighted the inefficiencies of the civil service and suggested recommendations. It was named after the two foreign consultants that drafted the report: John D. Montgomery and Milton J. Esman.

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This period was marked by the launching of the New Economic Policy (NEP) in 1970, aimed at eradicating poverty and eliminating the association of economic status with race. It must be noted that there was racial unrest in 1969 due to economic imbalance between the different ethnic groups: Malays, Chinese and Indians. This warranted the introduction of the NEP to foster national unity and harmony among the races. The overriding objective of the NEP however, was to eradicate poverty by fostering ‘growth with equity’ through industrialization and the rural development projects. This was carried out by the creation of many public enterprises in agriculture, property development services, urban planning etc. Hence, a market driven public sector emerged, thus the implementation of massive education and training programmes continued to both strengthen the civil service and uplift the economic status of the Bumiputeras. The domestic industry was very weak at this time, contributing to only 10% of the GDP, (Mansor 1997, p.13). The government therefore, engaged in export-oriented industrialization by introducing an array of incentives including tax relief. Free Trade Zones were developed with good infrastructure. Several new agencies were formed to look into manufacturing and management practices such as Standards and Industrial Research Institute of Malaysia (SIRIM) and National Productivity Corporation (NPC). The Malaysian Industrial Development Authority (MIDA) was established to promote foreign investments in Malaysia. Another initiative taken by the Government was to upgrade the status of Bumiputera through the creation of Majlis Amanah Rakyat (MARA), otherwise known as the Council of Trust for the Indigenous People. MARA was an agency of the Ministry of Entrepreneur and Cooperative Development that was mandated to develop and implement programs aimed at assisting the Bumiputera to participate actively towards creating a Bumiputera Commercial and Industrial Community (MARA’s mission statement.). Among the strategies employed to achieve this purpose, was the creation of a trust fund (Bumiputera Unit Trust) to enable Bumiputeras to acquire equity shares (30% of country’s corporate ownership). MARA also provided loan facilities and avenues for the training of Bumiputeras in other fields like science and technology. In fact several capable leaders heading corporations are beneficiaries of MARA’s training. The 1969 Training in West Malaysia, which is said to be the most important training document on the training needs of civil servants, endevoured to generate an effective, efficient and just public service that is driven by well motivated and skilled personnel through professional training in scientific and management techniques. Since government of the day perceived training as the most effective instrument for capacity building, the Training and Career Development Division in the Public Service Department was mandated to oversee the conduct of training programmes. The establishment of the National Institute of Public Administration (INTAN) in 1972 further enhanced this training opportunities for public servants at all levels. The types of training range from in-service to basic, middle, advance, top management to departmental training. Civil Servants are usually trained to develop their capacities on government systems and procedures, policy formulation and analysis, project planning and

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management and financial management. Today INTAN not only provides training but also develops training materials, research and consultancy. Training programmes range from quality management, financial management, economic development, policy management, senior management, graduate studies, case studies development and multi-media, IT and language studies, (Mansor, Ahmad, Mansor 2003, p.128-29). Malaysian Administration and Modernisation Unit (MAMPU) were later established by Dr. Mahathir to replace the Development Administration Unit (DAU). The aim was to improve and modernize public sector organizations. During this phase the emphasis was on building and strengthening individual capacities side by side with institutional building. Phase Three: 1982 – 1997 Malaysia Incorporated was launched in 1983. This was a major turning point in the history of the public sector. Inspired by the Japan Incorporated, Malaysia Incorporated was launched, to collaborate with private sector in the development of the country, (Abdoul Karim 1999) and to test new management models with much emphasis on quality. Meanwhile, the public sector continued to expand over the years and became too big. Government launched a privatization policy in 1983 to deal with the problem of managing a big public sector. At least 20 projects were privatized to reduce the workload and cost on government, and to improve efficiency and productivity. Due to the absence of enough domestic capital, government resorted to borrowing in order to finance development projects. In its effort to industrialise, Malaysia invested heavily in heavy industries and services. The Heavy Industrial Corporation of Malaysia (HICOM) was formed at this time to enhance the diversification of manufacturing industry. As part of the industrialization effort, the government promoted small and medium scale enterprises coupled with the generation of local technological capacity. Unfortunately, in 1984, HICOM suffered huge financial losses with deteriorating terms of trade, drop in oil prices and increasing external debt (World Bank 1999, p.13) and this situation persisted until 1987. In 1985, for the first time in the nation’s post-colonial history, Malaysia experienced negative economic growth of -1% and 0.8% in 1986 (Mansor 1997, p.21). The recession caused an alarm and forced government to shift gear. Coupled with the pressure by the World Bank and the IMF, Malaysia had to adopt a structural adjustment programme. As part of the structural adjustment programme, privatization, deregulation, and public sector reforms became the order of the day. Government started to roll back to create more room for the private sector which emerged as engine of growth. Working together with private sector was deemed necessary for economic growth. The period also marked a shift in approach to capacity development that put much emphasis on organizational and managerial capacity. The National Development Policy (NDP) was introduced to replace the NEP in 1991. The primary objective of NDP is to enhance racial unity so that it could strengthen the social and political stability. With NDP; the emphasis on Bumiputeras was downplayed. Instead, the focus shifted more on

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national development. This was also the decade of industrialization and the advent of privatization of public enterprises. The First Industrial Master Plan was drawn for “import protection and export promotion activities”, (World Bank 1999, p.14). This Master Plan formed part of the policy that aimed to transform Malaysia into a knowledge-based economy in mid 90s. The implementation of the Master Plan was a success, as there was a large inflow of foreign direct investment (FDI) into the manufacturing sector, adding capacity in the export-oriented industries, including the oil, gas and petrochemical sectors. Investment in the capital- intensive and high technology areas also contributed to higher rate of private investments, (OPP3 2005). By the end of the decade, with the exception of the 97/98 financial crisis, there was rapid economic growth. The construction sector also grew rapidly, as local capacity continue to increase in the civil engineering sub-sector, which was made possible by the privatization of large infrastructure and civil engineering projects, such as roads, highways, airports, power generation, telecommunications, rail transport and the ports,(OPP3 2005). The launching of the National IT Agenda and Multimedia Super Corridor (MSC) was also a contributing factor in developing institutional capacity. Phase Four: 1998 – 2005 This period is commonly known as the post crisis period. By 1998, the National Development Policy (NDP), which replaced the NEP, was already facing out. Due to economic setback that was brought about by the financial crisis of 1997/98, efforts to reengineer growth continued with the launching of the National Vision Policy (NVP) which was to last between 2001- 2020.The Third Outline Perspective Plan (OPP3) therefore outlines the strategies and programmes for sustainable development under NVP. In fact, NVP is an extension of the previous policies, aimed at reinforcing the implementation of the programmes. With the NVP, the public sector remains in consultative engagement with the private sector and NGOs. The impact of capacity development initiatives was realized in 97/98, when the economy was deemed resilient enough to recover from the crisis. Compared to its neighbours there is capacity within the Malaysian economy to survive the crisis. The government’s introduction of capital control and fixed exchange rate provided further support. The National Economic Action Council (NEAC) was established in January 1998 and the National Economic Recovery Plan (NERP) was launched six months later to redress the financial crises. According to the mid- term review of the 7th Malaysia Plan (1996 to 2000), the first two years of the post crises period, drastic measures were taken to transform the economy from an input- driven to productivity and quality driven one. The focus of the Plan was on economic recovery and restoration of economic growth. This was achieved by strengthening financial institutions, prudent physical management, generating reserves and savings, attain health balance of payments. Efforts were further directed to improving quality of life, strengthening financial institutions, manufacturing services and poverty reduction.

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Through bilateral and multilateral meetings, Malaysia was able to negotiate with the IMF and World Bank to pursue interventionist strategies in regulating the activities of ‘highly leverage institutions’ (MITI 2005) from market volatility. The move was further necessitated by the existence of:

• Massive reversal of capital flows • The depreciation of the ringgit • Weakening stock markets • The high rate of inflation • The slow economic growth of 3.0% as opposed to the 8.0% target of the 7th

Malaysian plan. The Second Industrial Master Plan (IMP2) which is from 1996 to 2005 devises policies and strategies aimed at “transforming the manufacturing sector into a resilient, broad based-and internationally competitive sector,”(MITI 2005). It is based on a cluster approach to industrial development, and focuses on strengthening industrial linkages, enhancing value added activities and increasing competitiveness. In addition to strategies of the First Master Plan, two new strategies were introduced namely, Manufacturing Plus-Plus Strategy and Cluster-Based Industrial Development. Manufacturing Plus-Plus Strategy aims to transform Malaysian factories from assembly based to broader dimensions of research and development (R&D), product design, distribution and marketing. It also works towards a productivity driven growth and utilization of high technology (automation and robotisation), to increase total factor productivity through knowledge based capital-intensive manufacturing, and more importantly, the creation of innovative and best management practices. Cluster-based industrial development is directed at integrating key industries, suppliers and supporting services and institutions. Both strategies are geared toward a global oriented manufacturing to enhance competitiveness, human resources management, technology, and to promote local companies. The shift in emphasis on quality management strategies and the rapid rise of information technology has led to the implementation of electronic government, as there were constraints and complaints against public service such as delayed project implementation and service delivery. As part of public sector reforms, much emphasis has been placed on continuous improvement and quality management giving MAMPU and INTAN greater role to play. Improvements were seen in the immigration department leading to the introduction of the client’s charter and several government departments getting the ISO 9000 certification.

3.1.3 Critical Decisions and Drivers of Capacity Development Malaysia has been transformed since independence from an agricultural, investment-based economy to a manufacturing based economy, with public-private partnership as a key to economic advancement. As we review the trajectory of capacity development from 1957 to the present, we can summarise the critical decisions and drivers of capacity development in Malaysia as follows:

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• the strength of the institutions and infrastructure which Malaysia inherited from

the British and the smooth transition at independence under Tunku Abdul Rahman;

• a good system of rural development, inherited in part from the British, which involved development of plans in each district in ‘operations rooms’ and with a ‘red book’;

• the threat of communism in the 1950’s which lent a sense of urgency to efforts to enhance services and quality of life for the rural population;

• enlightened and benevolent political leadership from 1957 – 1981 under such Prime Ministers as Tunku Abdul Rahman, Tun Abdul Razak and Tun Hussien Onn and Tun Mahathir.

• a commitment to maintaining macroeconomic and political stability; • a considerable investment in education both in Malaysia and in foreign countries,

facilitated by programs such as the Colombo Plan; • a pride in developing an elite Malaysian Civil Service (MCS) and the strength of

the core institutions in the civil service such as the Public Service Department, INTAN and MAMPU;

• a policy to maintain racial harmony and to promote equity among the races, which led to a need to strengthen the economy, or ‘increase the size of the pie’ to be shared among the races.

• a commitment to maintain an environment of national competitiveness through trade liberalization with a strong emphasis on free and fair trade9;

• an understanding that investment in the quality of public, government and market institutions and the production and diffusion of technology were key to maintaining Malaysia’s competitiveness in global and regional trade10.

• Malaysia’s endowment with natural resources, including rubber, palm oil and petroleum, which enabled it to build its financial capital, organizations, technology and infrastructure and invest in education and training;

• The development of a powerful vision for development under Dr. Mahathir known as ‘Vision 2020’ helped to galvanize both the public and private sectors towards growth and capacity development;

• An institutionalised consultative mechanism to engage private sector and NGO’s. In reflecting on the drivers of capacity development it is useful to look as well at the factors that inhibited capacity development. These can be summarized as follows:

• the economic crises of 1985 and 1997 that slowed down the economy and forced the government to reduce its investments in infrastructure, technology and capacity building

9 This is outlined in the National Vision and Malaysia’s Millennium Development Goals. 10 This was elaborated in a speech by the Finance Minister II, Tan Sri Dato’ Nor Mohamed Yakcop, in his keynote address at The Edge/ Microsoft Malaysia Business Summit on Competitive Strategy, dated April 12, 2004, Petaling Jaya.

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• the very heavy investments under Dr. Mahathir in infrastructure which is considered by many to be premature and excessive, such as Putrajaya,

• early privatization strategies, which put public resources completely in the hands of the private sector in a way, turned profits over to the private sector but left the public sector with the responsibility of absorbing losses. Examples include the sale of the Malaysian Airline System (MAS) below market value, the sale of a profitable government owned companies such as PNB and ASN.

3.1.4 Stakeholder Involvement

During Phase One and Two, as described in section 3.1.2 above, federal bureaucrats in government agencies were solely responsible for capacity building through development planning headed by the Economic Planning Unit. By the mid 1980s, the strategy changed. The private sector began to have a role to play in capacity building by participating in planning and policy making through the formation of an Inter Agency Group (IAG); a network of public and private sector institutions. The private sector was then invited to provide government with policy inputs on export performance, employment and investments. The Federation of Malaysian Manufacturers (FMM) and the Malaysian Business Council (MBC) are among those that are usually solicited for guidelines on industrial policies, privatization, and deregulation as part of the structural adjustments programmes. Their inputs are also sought on budgeting, research, and development. The Budget dialogue, which was initiated in the late 1970s, takes place among finance officials, academics, NGOs, research institutions and representatives of the business sector. The Ministry of International Trade and Industry (MITI) is one of the various government departments that have played a key role in the promotion of capacity development in Malaysia. The purpose of MITI is “to promote and safeguard Malaysian interest in the international trade arena , to spur the development of industrial activities and to further enhance Malaysian economic growth towards realizing Vision 2020”,(MITI’s Mission Statement). The “MITI dialogue” was therefore initiated in the late 1980s to focus on the formulation of long-term industrial strategies based on written suggestions from participants. Agencies under MITI are:

• Malaysian Industrial Development Authority (MIDA) • Malaysian Industrial Development Finance (MIDF) • Malaysia External Trade Development Corporation(MATRADE) • National Productivity Corporation (NPC) • Small and Medium Industries Development Corporation (SMIDEC)

With effect from 20 February 2001, the existing Industry Cluster Working Groups and Task Forces were merged to form ten Industry Task Forces as follows:

• Electrical and Electronics

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• Automotive • Machinery and Equipment (including Engineering Services) • Pharmaceuticals • Petrochemicals • Palm Oil-based Products (Food) and Oil Palm-based Products (Non-

food) • Wood-based Products • Rubber-based Products • Agro-based and Food Products • Aerospace

3.1.5 Donor Involvement and Aid Modalities

From 1971 to 2004, Malaysia has benefited from Official Development Assistance (ODA) in both capital and technical forms. Capital assistance amounted to 90% while technical assistance constituted only 10% of the package. There have been grants from bilateral and multilateral agencies, such as the United Nations (UN) and its specialized agencies. Capital assistance has been sought from the World Bank (WB), the Asian Development Bank (ADB), the Islamic Development Bank (IDB), in the form of Soft Loans from Japan and as well as from bilateral sources. However, Malaysia has ceased to be heavily depended on foreign aid or donor assistance, but has become a major source of technical assistance to other developing countries through its Malaysia Technical Cooperation Programme (MTCP), which is geared towards providing capacity-building programmes for other developing countries. The nature of foreign aid has changed over the years depending on the demand and policy. Aid was directed from financing development programmes on poverty eradication to economic growth through technology transfer, (UNDP 2005).

3.2 Checks and Balances:

3.2.1 Formal Constitutional and Political Checks and Balances Public accountability falls under Articles 106 and 107 of the Federal Constitution and the types of accountability systems range from fiscal, managerial and program accountability. Fiscal is overseen by the Public Accounts Committee (PAC) and mismanagement or rent seeking by Anti-Corruption Agency. Being a multi-party system, enables the opposition parties, which enjoy 35% of the national votes to check on the activities of the ruling party. However, the ruling coalition (the Barisan National that comprises fourteen political parties, namely UMNO, MCA, MIC, GERAKAN, PPP, PBB, SUPP, PBDS, SAPP PBS, LDP PBRS, UPKO and SPDP) has ruled for so long (47 years) that, it tends to be dominant. It is often accused of exerting too much control over government institutions. Political bargaining among ethnic groups, especially on sensitive issues carried out among the political parties known as “Democracy in Camera” seems workable and acceptable. The main institutions established to account for the management of public funds are the Auditor General’s Department. The Public Accounts

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Committee (PAC) is responsible to the Parliament and the deputy chairperson comes from the opposition party. To a certain extent, the Backbenchers’ club plays an active role in parliament.

3.2.2 Domestic Accountability Systems The conduct of free and fair elections every five years is another way of ensuring accountability. Despite some incidence of electoral malpractices, (interviewees cites press control and misuse of public facilities), an independent electoral commission checks the overall electoral process. “Hansard’, which is a written record of parliamentary debate, reveals the achievement of government, criticisms by opposition party and defense by executive branch. (Ahmad, Mansor, Ahmad, p.181). Hansard is published in some of the local newspapers for public view. Furthermore, parliamentarians can call for a commission to be formed under the Parliamentary Select Committee (PSC) to investigate complaints and recommend for an application of disciplinary procedure against offenders or defaulters. Every government agency has a media unit to disseminate information on matters concerning the public. With electronic government, electronic media is a good means of ensuring transparency. Press is restricted, however, the press reports regularly on parliamentary debate. Malaysiakini is one radical press group that makes wide and critical coverage on government matters. Other systems of checks and balances are the Suhakam (Commission on Human Rights), Institute of Integrity and the Securities Commission.

3.2.3 Monitoring and Evaluation by Government of National and Local Capacity Development

Monitoring and evaluation of national and local capacity development is carried out by the preparation of progress reports or mid-term reviews of the national development and sectoral plans. However, it must be noted that progress reports deliberate on the achievements, resources employed and activities completed. They neither provide information on the efficiency of the government machinery, nor expose the shortcomings and failures of government programmes. Therefore, programme accountability is largely compromised. Local capacity evaluation is usually carried out within public bureaus. They vary from organisational performance evaluation, jobs evaluation to the evaluation of individual staff appraisals.

3.3 Summary: Tracing the Trajectory of Capacity Development in Malaysia

Capacity development in Malaysia has been implemented through four phases of policies since independence in 1957. After analyzing, one can conclude that, during the first two periods the emphasis was on educating the people at all sectors of the society. The first two phases can therefore be characterized as focusing on individual capacity. Phase

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Three can be seen to expand its focus on organizational capacity. Phase Four is marked by an increase in its focus on institutional capacity. To develop individual capacity, training has been the primary means in the public sector. In the early years following independence, the Civil service has been adequately staffed, with the necessary skills, expertise and attitude required for the implementation of national development policies. To complement individual capacity building, a number of statutory bodies or state owned enterprises were also established in 1970s and 1980s as government began to implement its privatization programmes. This became a turning point for the organizational and institutional capacity building. The major stakeholder in capacity development has been the public sector. The road towards building capacities was facilitated considerably by the existence of a strong bureaucracy that was inherited from British colonial rule and the neutrality and professionalism of the administrative elites who took over from the colonials. Capacity building programmes were operated under broader national policies, the most influential of which has been the NEP. While the NEP focused on “growth with equity”, the NDP concentrated on industrial development, and the NVP had a broader goal to facilitate the realisation of the MDG and Malaysian Vision 2020. From the 1970s, there was corporate restructuring to meet the objectives of the NEP. The objective of all these policies that were implemented through Five-Year plans was to eradicate poverty as a stepping-stone towards achieving socio-economic development. The most effective strategy for developing capacity has been through investing in general education and professional technical education. Malaysia has invested considerably in education since it gained independence in 1957. This is reflected both on its own budget and in its participation in plans from donors such as the Colombo plan. It has managed to leap frog from a primarily agriculture and resource based economy to one which is in manufacturing and technology largely due to its investment in education and to enlightened strategies such as twinning with educational institutions in more developed countries to build its capacity quickly. The building of human capital underpins development of organizations and institutions and feeds economic and social development. Malaysia now has strong business skills as well as a broad range of professionals to run the bureaucracy, provide for education and health care, build the infrastructure and technology. Africa could benefit from a more careful review of Malaysia’s strategies and policies in the education sector.

4.0 Lessons Learned from the Malaysian Experience for Capacity Development in Africa.

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The Malaysian country study was undertaken with a view to drawing lessons from the Malaysian experience in capacity building which might be useful in the continuing process of capacity building in Africa. This section will identify and analyse such lessons, outlining the strategies that are effective at building capacity, why they were effective and why they might be effectively adapted and applied in Africa.

4.1 Setting a Positive Trajectory

A good governance mechanism is the first foundation needed for capacity development, yet strategies for governance are not to be imposed, but be willingly accepted by all stakeholders involved. The Malaysian experience has shown that, the political will, good leadership, adequate resources, sound economic policies and the undying commitment to see one’s goal achieved are important ingredients for a nation’s development. An efficient public sector and dynamic bureaucrats do make a difference. The MCS with the culture of neutrality, efficiency and professionalism made a good impact on economic development. Interviewees agree that, the high premium placed on obedience and respect for authority, facilitated governance. In other words they mean to say that, Malaysians possess these qualities; they are governable. The Government, during the 1997-98 crisis resisted the temptation of taking IMF’s loan and abiding with IMF’s terms of structural adjustment, which today is the greatest obstacle to growth in Sub-Saharan African countries. Malaysia as a multi-cultural, multi-lingual, multi racial and multi-religious society, with the Malays constituting the largest ethnic group, is not immune to the threat, ethnic cleavages or political instability. Yet the government though the NEP was able to bring about harmony among the races. Economic growth occurred in a stable environment, which is partly attributed to consociational power sharing within the Barisan Nasional (the ruling coalition party that represents the different races). Such political collaboration did not only bring about unity but further laid the foundation for foreign investments. Affirmative actions, though have received a lot of criticism from the non-Malays somehow managed to correct the economic imbalance to a certain degree between the different races. Economic imbalance has bred a lot of riots and instability in the African continent; it therefore should not be underestimated. Policies should be directed towards promoting growth with equity. Government should not focus on urban development at the expense of rural development. A clearly communicated Vision is essential, and partnership between public sector, private sector and civil society in the implementation of a vision is a necessity. Public-private sector partnership has also played a very significant role in the economic development. This creates a sense of ownership of national development projects among all stakeholders. Privatisation is important, but maintaining ownership of organizations with emphasis on corporate culture is even more important.

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While the Malaysian civil service is not without its problems, and is often criticized as being slow and unresponsive, there are some lessons, which can be learned looking back over the history of the civil service, which may by of use to African countries. A strong public service is clearly a key to capacity building in all sectors. African countries may benefit from reviewing and adapting some of the Malaysian experience in developing pride in their civil service and building the capacity of the service by focusing resources on key central agencies, which were in turn responsible for developing other organizations.

4.2 Strengthening Accountability for an Effective State

Another important lesson to be learnt by Sub-Saharan-Africa is that states should not exert too much control over people. When people are disempowered by extreme control their creative and innovative abilities are undermined. A true reflection of this is the total subjugation of people in military and post military regimes in most African countries. The first step in strengthening accountability therefore, is to establish, maintain and continuously improve on the democratisation of the state. As mentioned earlier, post independence Malaysia has ever been governed by a coalition government that is representative of all ethnic groups. This element of power sharing has facilitated consultation and consensus in the formulation of national policies. Consultation is extended to the private sector, chamber of commerce and industry, various organisations and NGOs. The MITI dialogue and the National Economic Consultative Council (NECC) are examples worth emulating by African countries. While elections are an effective means to hold governments accountable, at the local level where officers are appointed rather than elected, there is less accountability and more tendencies for more corruption. There is therefore, a need to create more commissions to look into the activities of other enforcement agencies such as the customs and judiciary. Strengthening of enforcement agencies can be done through perception surveys and other bodies such as Institute of Integrity, SUHAKAM and Institute of Corporate Governance available in Malaysia.

4.3 Operational Improvements in Programme Design

In Malaysia, there is a systematic planning of programmes, with the introduction of Outline Perspective Plan 1 (OPP 1), Outline Perspective Plan 2 (OPP 2) and 5 -Year Development Plans. Also for various sectors and levels, government undertakes a systematic planning process. Programme implementation is clearly divided between different agencies; however, there is no effective evaluation on the impact of policies on the society or economy. It is still very much on output-based evaluation. Evaluations are done periodically such as the mid-term reviews. This is a weakness that Sub-Saharan Africa could learn. Monitoring should be systematic by evaluating impacts of policies on the target group. Thus could further improve policy design, a process done at an earlier

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stage. Otherwise in the case of Malaysia, when the Mathematics and Science courses were directed to be taught in English at Primary 1, it was not closely monitored, shortcomings were often too late to be corrected.

4.3.1 Use of Consultative Committees in Budgeting and Planning Malaysia has a somewhat unique way of containing and resolving conflicts among different interest groups and ensuring that all such groups have a voice in both the budgeting and planning process. While these processes were driven in Malaysia by factors that may not be as prevalent in African countries, they may nevertheless have useful and practical implications for capacity building in Africa. Throughout the history of Malaysia since independence there have been consultative processes, which were used in the development of budgets, development plans and in the process of addressing specific crisis such as the economic crisis of 1997. Some of these processes simply involve consultation among government departments, which has become institionalized and is widely used in policy development. Other of these processes involves the creation of a consultative committee for a specific purpose. The consultative committee has a number of sub-committees representing different interest groups. In all cases there are sub-committees to represent the three racial groups and in many cases specific committees represent the interests of often-competing business groups and civil society groups. This consultative process is not without its limitations. As it involves only a well-informed and articulate sector of each interest group it is often criticized as being ‘elitist’. The process is also criticized due to the fact that the solutions reached are inevitably compromise solutions in which all groups not only win, but also lose, on some of their agenda. Nevertheless, the consultative process has been effective in building capacity because of three factors. First the process provides an arena through which conflicts within each interest group can be freely aired, debated and resolved behind closed doors. Individuals selected to participate have been because of their ability to represent broader interests and to have become skilled in resolving the conflict in practical ways and communicating the resolution effectively to their constituents. This in itself goes a long way to minimizing open conflict, reducing violence as a result of this conflict, and protecting resources needed to build capacity.. Second the process draws upon the expert knowledge, insights and judgment of leading thinkers in the community. This helps to identify risks associated with a particular policy direction, surface longer-term implications, avoid pitfalls and direct resources and opportunities to develop capacity. Finally the participation in these committees creates in their members a sense of ownership of the plans and policies and a sense of commitment to the people they represent and to the country as a whole. Having this stake in the building of the country,

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they are more likely to want to stay in Malaysia and to encourage their children to stay in Malaysia. In Africa, where armed conflict and tribal rivalries often retard and obstruct capacity development, where planning and budgeting processes have been less well thought through and where there is a significant ‘brain drain’, the Malaysia experience with consultative committees may have practical applications.

4.4 Managing National Capacity Development Programmes.

The essence of national capacity development programme in Malaysia was to achieve a critical mass of human capital in all areas: at individual, organizational, institutional, public and private sector levels. The importance of education was advocated through all channels, especially through educating the public by making the media accessible. Adult education was one of the means adopted in the 1960’s and the 70’s to raise awareness among the local people of the older generations. This is one way that Sub- Saharan Africa could advocate the importance of education in promoting other areas of development.

4.5 Improving Aid Management and Donor-ship

A good understanding between donors and recipient is important for effective utilization of aid. Aid- depended programs too should be given the same attention as government funded programmes. The programmes should be planned systematically and flexibility to cater for unforeseen circumstances such as donor withdrawal and shortage of funds. African states should be given the opportunity to implement aid-funded projects in their own terms, but monitoring and evaluation are best done by both parties to avoid mismanagement of funds.

4.6 Targeted Use of Monitoring and Evaluation. Effective coordination of national policies and programmes is ensured by regular meetings between states and federal government of Malaysia. The Implementation Coordination Unit (ICU) in the Prime Minister’s Department has been mandated to coordinate and monitor the implementation of projects. A Project Monitoring System has been installed in all 25 ministries and 13 states, and a monthly progress report is submitted to the National Development Working Committee, which discusses implementation issues, problems and means of overcoming these problems. However, Malaysia lacks targeted monitoring and evaluation; hence does not measure the effectiveness of public policy. Even the general evaluation of measuring the quality of life conducted by EPU was done at the macro level. There are no indicators for evaluation at program level. Hence, neither the level of efficiency nor the impact on the desired results of public programs was evaluated.

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Nonetheless, there are efforts to improve on evaluation of policies and programmes.11 Hence, the Sub-Saharan African governments should device a systematic monitoring and evaluation of its programmes.

11 as highlighted in the key note address of the Deputy Director General of the Economic Planning Unit, addressing participants at the Biennial National Business Conference in Botswana,(9th August 2005) on the topic ‘Ensuring Implementation of National Policies for Economic Diversification’.

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Tables

Table 1.0 Malaysia: Selected Macroeconomic Indicators, 1970-2004

Year Real GDP growth (%)

Inflation (%) Unemployment Rate (%)

Population (millions)

GNP per capita at current market

prices (US$)

1970 6.3 1.9 8.0 10.4 346b 1975 2.5 4.5 7.0 12.3 771.6 1980 8.0 6.7 6.1 13.6 1,566.4 1985 -1.1 0.4 6.9 15.7 1,896.0 1990 9.7 3.1 5.1 17.8 2,311.0 1995 9.48 3.4 2.8 20.7 3,960.0 1996 7.1 3.3 2.6 21.2 4463.0 1997 4.6 2.7 2.6 21.7 4,284.0 1998 -7.5 5.3 4.9 22.2 3,179.0 1999 5.4 2.8 3.0 22.7 3,242 2000 8.3 1.6 3.1 23.5 3,852.0 2001 0.3 1.4 3.6 24.0 3,383 2002 4.1 1.8 3.5 24.5 3611 2003 5.3 1.1 3.4 25.1 3,905.0a 2004 7.0 1.1* 3.4 25.6 4,352.0a

Note: *: Covers the month of January to July 2004 only a: 1987= Constant Price b: Data for Peninsular Malaysia c: Preliminary Source: Malaysia, Economic Report (1998/1999, 2004/2005), Malaysia Plan (1-8), Central Bank of Malaysia: Monthly Statistical Bulletin Oct. 2003 and Central Bank Of Malaysia: Annual Report 1998 Table 1.1 Malaysia: Incidence of Poverty as a Percentage of Total Households,

1970-2002

Year

Incidence of Poverty (%)

1970 49.3 1980 37.4 1990 16.5 2002 5.1

Source: Malaysia, Millennium Development Goals, 2005

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Table 1.2 Malaysia: Government Effectiveness, 1996-2004

Year Percentile Rank (0-100)

Estimate (-2.5 to +2.5)

1996 83.2 +1.07 1998 80.9 +0.78 2000 74.2 +0.69 2002 82.1 +0.96 2004 81.3 +0.99

Source: Governance Indicators: World Bank Website, http://www.worldbank.org Table 1.3 Political Stability

Year Percentile Rank (0-100)

Estimate (-2.5 to +2.5)

1996 81.7 +0.95 1998 64.2 +0.46 2000 61.8 +0.35 2002 57.8 +0.36 2004 58.7 +0.38

Source: Governance Indicators: World Bank Website, http://www.worldbank.org Table 1.4 Rule of Law

Year Percentile Rank (0-100)

Estimate (-2.5 to +2.5)

1996 82.5 +0.85 1998 76.8 +0.82 2000 71.1 +0.53 2002 67.9 +0.52 2004 64.7 +0.52

Source: Governance Indicators: World Bank Website, http://www.worldbank.org

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Table 1.5 Malaysia: Voice and Accountability 1996-2004

Year Percentile Rank (0-100)

Estimate (-2.5 to +2.5)

1996 51.8 -0.05 1998 42.9 -0.25 2000 42.4 -0.27 2002 42.9 -0.28 2004 37.4 -0.36

Source: Governance Indicators: World Bank Website, http://www.worldbank.org Table 1.6 Regulatory Quality

Year Percentile Rank (0-100)

Estimate (-2.5 to +2.5)

1996 82.9 +0.86 1998 70.1 +0.57 2000 64.2 +0.36 2002 69.4 +0.55 2004 64.5 +0.44

Source: Governance Indicators: World Bank Website, http://www.worldbank.org Table 1.7 Control of Corruption

Year Percentile Rank (0-100)

Estimate (-2.5 to +2.5)

1996 76.0 +0.51 1998 80.9 +0.73 2000 68.8 +0.28 2002 66.8 +0.36 2004 64.5 +0.29

Source: Governance Indicators: World Bank Website, http://www.worldbank.org

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Table 2.0 Malaysia: Federal Government Expenditure on Education as a Percentage of Total Expenditure, 1957-2004

Year

Expenditure (%)

1957* 14.2 1960* 18.0 1965 18.9 1970 18.04 1975 19.42 1980 13.2 1985 16.8 1990 18.5 1995 20.9 1996 21.4 1997a 21.3 1998b 18.4 1999c 22.5 2000 23.7 2001 25.0 2002 33.5 2003 25.5 2004 20.6

Note: * Data for the Federation of Malaya a Actual estimates b Latest estimates c Budget allocation Source: Monthly Statistical Bulletin: Central Bank of Malaysia and Malaysia, Economic Report, Various Issues

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Table 2.1 Numbers of Pupils in Assisted Primary Schools and Assisted Secondary Schools

Year

Primary School Percentage

of Population

(%)

Secondary School Percentage of

Population (%)

1957* 933,151 15.1 81,042 1.3 1960 1,130,539 NA 156,965 NA 1965 1,217,309 13.0 277,255 2.9 1970 1,678,000 16.1 545,329 5.2 1975 1,890,974 15.4 842,281 6.9 1980 2,008,973 14.3 1,083,818 7.7 1985 2,192,528 14.0 1,293,199 8.2 1990 2,445,595 13.7 1,366,068 7.7 1995 2,828,000 13.7 1,652,000 8.0 2000 2,933,877 13.3 1,998,781 9.1 2001 2,943,152 12.3 2,038,262 8.5 2002 2,989,284 12.2 2,052,956 8.4 2003 2,990,067 11.9 2,075,301 8.3

Note: * Statistics for Malaya excluding Singapore NA Data not available Source: Malaysia, Social Statistical Bulletin Various Issues and Malaysia, Statistics: Ministry of Education Table 2.2 Enrolments at Tertiary Level, Malaysia 1957-2004

Year

Number of Enrolments Percentage of Population (%)

1957 361b 0.01 1960 1,201 NA 1965 12,965 0.1 1970 14,937 0.1 1975 37,199 0.3 1980 57,718 0.4 1985 72,068 0.5 1990 124,346 0.7 1995 207,072 1.0 2000 344,250 1.6 2001 377,292c 1.6 2002 396,610 1.6 2003 522,549 2.1 2004 560,250c 2.2

35

Note: n.a Data not available b Covers number of students in College of Agriculture, Malaya, Technical College, Kuala Lumpur and Mara College, Petaling Jaya only c Number of Enrolments excluded Private Higher Institutions Source: Malaysia, Educational Statistics 1938-1967, 2004 and Malaysia, Social Statistical Bulletin ,Various Issues Table 2.3 Malaysia: Number of Doctors and Engineers, 1957-2004

Year

Doctors Engineers

1957* 843 NA 1960* 1009 NA 1965* NA NA 1970* 2543 906d

1975 2757 1537d

1980 3,858 8284c

1985 4939 14,976c

1990 7012 18,904b

1995 9608 36,394 2000 12,428 61,034a

2003 18,155 NA 2004 20,301 NA

Note: NA data not available * Figures excluded Sabah and Sarawak a Output refers to graduates from local Public Tertiary Institutions b Output refers to graduates from local Public and Private Tertiary Institutions c Membership of registered professionals d Figures for Peninsular Malaysia Source: Malaysia Plan 1-8 (RM1 – RM8) and Malaysia, Department of Statistics: Census of Professional and Institutional Establishments - Private Sector, Various Issues

36

Table 3.0 Malaysia: Infant Mortality rate (per thousand live births), 1957-2004

Year

Mortality Rate

1957* 75.0 1960* 68.9 1965 55.0 1970 40.8

1975* 33.0 1980 24.0 1984 18.4 1990 13.0 1995 10.8 2000 6.7 2001 6.6 2002 6.6 2003 6.3 2004 5.9P

Note: * Mortality Rates for Peninsular Malaysia p Preliminary Source: Peninsular Malaysia, Vital Statistic Time Series 1911-1985 and Malaysia, Social Statistical Bulletin, Various Issues. Table 3.1 Federal Government Expenditure on Health as a Percentage of Total

Federal Expenditure, Malaysia 1965-2004

Year Percentage (%)

1965 6.6 1970 6.1 1975 5.9 1980 3.7 1985 4.3 1990 5.0 1995 5.5 1996 5.9 1997a 6.2 1998b 5.6 1999c 7.0 2000 6.4 2001 6.3 2002 6.4 2003 7.8 2004 7.9

Note:

37

a Actual estimates b Latest estimates c Budget allocation Source: Quarterly Statistical Bulletin, Central Bank of Malaysia and Malaysia: Economic Report, Various Issues. Table 3.2 Life Expectancy at Birth by Sex, Malaysia 1957-2004

Year

Male Female

1970 63.5 68.2 1975 64.3 68.7 1980 66.5 71.0 1985 67.8 72.5 1990 69.2 73.7 1995 69.4 74.2 2000 70.2 74.9 2001 70.6 75.1 2002 70.7 75.3 2003 71.0 75.5 2004 70.4P 76.2

Note: P Preliminary Source: Malaysia: Department of Statistics, Vital Statistics Malaysia, Various Issues and Malaysia: Economic Report 2004/2005

Table 4.0 Foreign Aid to Malaysia (1971-2000)

Year Malaysia Plan

Technical Assistance

(RM million)

Total Foreign

Aid Share (%)

Capital Assistance

(RM million)

Total Foreign

Aid Share (%)

Total (RM million)

1971-1975

2MP 329.9 12.5 2311.8 87.5 2641.7

1976-1980

3MP NA NA 3907.0a 100.0 3907.0b

1981-1985

4MP 327.7 5.9 5203.0 94.1 5530.7

1986-1990

5MP 531.0 6.2 8067.0 93.8 8598.0

1991-1995

6MP 1469.6 15.8 7827.0 84.2 9296.68

1996-2000

7MP 1625.0 8.3 17,955.9 91.7 19,580.9

Total 4283.2 45,271.7 49,554.9

Note:

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n.a Data not available a Includes market loans b Total based on loans only Source: Malaysia Plan 1-8 and Millennium Development Goals

Table 4.1 Foreign Aid to Malaysia in Terms of Share of Total Federal Government

Expenditure (1971-2000)

Year Malaysia Plan

Technical Assistance

(RM million)

Share of Total

Federal Government Expenditure

(%)

Capital Assistance

(RM million)

Share of Total

Federal Government Expenditure

(%)

Total Federal

Government Expenditurec

(RM million)

1971-1975

2MP 329.9 4.7 2311.8 32.8 7051.2

1976-1980

3MP NA N.A 3907.0a 22.0 17,762.0

1981-1985

4MP 327.7 1.3 5203.0 20.1 25,908.0

1986-1990

5MP 531.0 1.5 8067.0 22.6 35,715.0

1991-1995

6MP 1469.6 2.9 7827.0 15.5 50,624.0

1996-2000

7MP 1625.0 1.9 17,955.9 21.3 84,488.0

Total 4283.2 45,271.7 Note: N.A Data not available a Includes market loans b Total based on loans only c Total federal government expenditure for the end of the year for each Malaysia Plan Source: Central Bank of Malaysia: Quarterly Economic Bulletin, Dec. 1982, Vol. 15(4) and Monthly Statistical Bulletin, Oct. 2003, Malaysia Plan 1-8 and The Millennium Development Goals

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Table 5.0 Malaysia: Foreign Direct Investment Inflows (US$ Millions)

Year

FDI inflows (US$ millions)

1983b 1260 1985-1995s 2902

1990 2333 1995 4100 1996c 4700 1997c 3800

1999 3895 2000 3788 2001 554 2002 3203 2003 2474 2004a 3451

Note: a Data refer to Approved Manufactured Projects b Net FDI flows c Excluding reinvested earnings s Annual average Source: UNCTAD: World Investment Report 2004, Website, http://www.UNCTAD.org and EPU: The Malaysia Economy In Figures 2005

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Table 6.0 Information on Corruption Received in PDRM and Actions Taken by Anti-Corruption Agency (ACA), Malaysia 2000-2004

No Subject 2000

PDRM

2001

PDRM

2002

PDRM

2003

PDRM

2004

PDRM

1 Information

received

1203

(11%)

1180

(13%)

1143

(14%)

1194

(12%)

1337

(12%)

2 IP’s opened

93

(13%)

122

(18%)

162

(15%)

167

(16%)

167

(17%)

3 IR opened 225 (10%)

242 (13%)

365 (15%)

318 (12%)

294 (12%)

4 Arrest 82 (19%)

101 (31%)

83 (28%)

87 (25%)

126 (25%)

5 Charged 24 (15%)

38 (33%)

45 (20%)

36 (36%)

31 (17%)

6 ACAR

24 56 54 42 47 (32%)

Total 1651

1739 1852 1844 2002

Note: IP : Investigation Paper IR : Intelligence Report ACAR : Anti-Corruption Agency’s Report

PDRM : Royal Malaysia Police Number in brackets reflected the percentage of corruptions received on PDRM out of the total information received on corruption in Malaysia.

Source: Report of The Royal Commission To Enhance The Operation and Management of The Royal Malaysian Police and Anti-Corruption Agency’s Report, Various Issues

41

Table 6.1 Malaysia: Number of Information Received on Corruption by Anti-

Corruption Agency, 1995-2004

Year

Information Received Change (%)

1995 8505 2000 10,736 26.2 2001 9,039 -15.8 2002 8,298 -8.2 2003 9,721 17.1 2004 11,413 17.4

Source: Malaysia, Anti-Corruption Agency: Annual Report, Various Issues Table 7.0 Malaysia: Rate of Crimes (Per thousand population) 1990-2004

Year Rate of crimes

1990 3.8 2000 7.1 2001 6.5 2002 6.1 2003 6.2 2004 6.1

Source: The Malaysian Economy in Figures 2005, Economic Planning Unit.

42

Appendices Appendix A

Effective States and Engaged Societies: Capacity Development for Growth, Service Delivery, Empowerment, and Security Interview Guide

1. Introduce the study and define terms including ’capacity development’12 and

’empowerment.’ 2. How does Malaysia measure capacity at the level of (only for those involved in

measurement such as EPU, other government officials):

a) State effectiveness b) Social engagement c) Organizational capacity d) Individual skills

3. Describe what you see as Malaysia’s major achievements in each of these areas?

a) State effectiveness b) Social engagement c) Organizational capacity d) Individual skills

4. Describe how Malaysia’s domestic accountability systems (administrative accountability systems, public service performance assessments, parliamentary committees, the media, and non-state interest groups ) have evolved over time. What impact has these systems had on capacity development?

5. Describe Malaysia’s development trajectory in the following key periods since independence. Highlight significant strategies, processes, decisions, and actors that drove the capacity development path since independence? How and why did they evolve over time? What factors contributed to the success of those strategies and what factors hindered the success of those strategies?

a) 1957 – 1968 b) 1969 – 1981 c) 1982 – 1997 d) 1998 – 2005

12 Capacity is the ability of people, institutions and societies to set and achieve objectives, perform functions and solve problems. It involves skills, incentives, organizational structures, resources, and an enabling environment. The ultimate goal of capacity development is to support the development of better skilled and oriented individuals, more responsive and effective institutions, and a better policy environment for pursuing development objectives.

43

6. What do you see as Malaysia’s present platform for capacity development? What strategies, processes, decisions, programs, and actors can sustain capacity development, and how?

7. The World Bank is seeking insights into how its lending can more effectively contribute

to capacity development in Africa. Based on your assessment of the Malaysian experience, what advice would you offer to the Bank about how they might more effectively support capacity development in Africa.

44

Appendix B Lists of People interviewed 1) Dato’ (Dr.) Anwar Fazal Director World Alliance for Breastfeeding Action (WABA) P.O Box 10200, Penang 10850 Malaysia 2) Dr. Chandra Muzaffar President International Movement for a Just World Lot 1066, Jln. SS22/43 Damansara Jaya 47400 Petaling Jaya 3) Dr. Denison Jayasooria Executive Director Yayasan Strategik Sosial (YSS) No. 1, Jalan Rahmat 5th Floor, Menara Manikavasagam Kuala Lumpur 4) Dr. K.J John Executive Chairman Knowledge Summit Sdn. Bhd. Suite E-13A-10, Plaza Mont Kiara 50480 Kuala Lumpur 5) Mr. Lee Chong San Deputy President The Kuala Lumpur Society for Transparency and Integrity Level 27, Wisma Tun Sambathan Jalan Sultan Sulaiman 50000 Kuala Lumpur 6) Mr. Leslie James 47, Cantonment Road Penang 7) Datuk Dr. Muhammad Rais B. Abdul Karim Vice Chancellor

45

Universiti Pendidikan Sultan Idris (UPSI) 35900 Tanjung Malim Perak 8) Tan Sri R.V Navaratnam Corporate Advisor Sunway Group Level 18, Menara Sunway Jalan Lagoon Timur Bandar Sunway 46150 Petaling Jaya 9) Ms.Tan Pek Leng Executive Director Socio-Economic and Environmental Research Institute (SERI) 10, Brown Rd., 10350 Penang 10) YB Dato’ Dr. Toh Kin Woon (Member of Manpower Planning, Penang) Chairman Socio-Economic and Environmental Research Institute (SERI) 10, Brown Rd., 10350 Penang 11) Raja Dato’ Dr. Zaharaton R. Zainal Abidin Director General Economic Planning Unit Prime Minister’s Department Block B5 & B6 Federal Government Administrative Centre 62502 Putrajaya

46

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