Transformational Leadership: The Experience of Malaysia
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  1. Transformational Leadership: The Experience of Malaysia Dato’ Sri Idris Jala
  2. Transformational Leadership The Scope of expectations of the People Unpopular things Popular things • Leadership is about dancing on the edge • It is about building trust capital (doing popular things the people wants) • It is also doing something outside their expectation (unpopular things) • Transformation is broadening the scope “Transformation Leadership is about disappointing people at the rate they will permit” – Marty Linsky, Harvard Professor (Transformation Leadership)
  3. The Road Most Travelled The Road Less Travelled In 2010 we were at crossroads. We were stuck in the Middle Income Trap with increasing debt and fiscal deficit
  4. Road most travelled • 90% of high income countries take this road • High income • Wide income disparity • But unsustainable fiscal position i.e. high govt debt and fiscal deficit Govt Debt to GDP Fiscal deficit (% to GDP) Japan 229 % -6% Govt Debt to GDP Fiscal deficit (% to GDP) Greece 176 % - 7.2% Govt Debt to GDP Fiscal deficit (% to GDP) United States 104 % - 2.5% Govt Debt to GDP Fiscal deficit (% to GDP) United Kingdom 89% - 4.4% Govt Debt to GDP Fiscal deficit (% to GDP) Italy 133 % - 2.6% Govt Debt to GDP Fiscal deficit (% to GDP) Singapore 104 % - 1.2% Govt Debt to GDP Fiscal deficit (% to GDP) France 96% - 3.6% Source: Trading Economics
  5. Govt Debt to GDP Fiscal deficit (% to GDP) Switzerland 34% 0% Govt Debt to GDP Fiscal deficit (% to GDP) Sweden 43% 0.2% Govt Debt to GDP Fiscal deficit (% to GDP) Denmark 40% - 2.1% Govt Debt to GDP Fiscal deficit (% to GDP) New Zealand 24.6 % 0.3% Source: Trading Economics Road less travelled • Only 10% of high income countries take this road • High income but sustainable fiscal position (relatively low Govt debt and fiscal surplus/balance) • Inclusive development (narrow income disparity)
  6. 6,760 7,530 7,530 8,230 9,060 10,200 10,850 11,120 10,570 9,850 11,455 11,905 12,195 12,275 12,475 12,615 12,745 12,735 12,475 12,235 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Malaysia - GNI per capita, Atlas method (current US$) High Income Threshold GNI pegged 13% Source: World Bank Atlas Method, based on figures released in July 2016. 2016 figure is PEMANDU estimate based on World Bank’s GNI per capita calculation using the Atlas Method using currently available public information Global Financial Crisis 15%15% 19% 33% 19% 27% If pegged at USD1:RM3.22, gap to threshold: 2010: 33% 2011: 31% 2012: 22% 2013: 17% 2014: 11% 2015: -3% 2016: -5% GNI per capita (current USD) Launch of ETP We promised to break free from the middle income trap, now we are on the road to high income
  7. We are no longer stuck in the Middle Income Trap with worsening fiscal deficit World Bank’s High- income threshold Malaysia’s GNI per capita 20162010 33% USD 12,276 USD 8,280 USD 9,850 USD 12,235 19%We were stuck in the middle income trap Source: World Bank Atlas Methodology
  8. 2x growth in Private Investment ETP Launch
  9. To date, 2.26 mil jobs have been created We promised to create 3.3 million jobs in 10 years
  10. 49.3 37.7 37.4 20.7 19.4 16.5 12.4 8.7 6.1 8.5 6.0 5.7 3.6 3.8 1.7 0.6 1970 1976 1979 1984 1987 1989 1992 1995 1997 1999 2002 2004 2007 2009 2012 2014 Source: Department of statistics % Malaysia has successfully brought poverty down to 0.6% 0.6% Poverty Rate
  11. World Bank Report (Economic Monitor 2014) ‘Malaysia has in many ways become a success story in shared prosperity. Shared prosperity means that all households experience income growth, but growth is higher for those households at the bottom of the distribution, a pattern that leads to lower inequality. In the past 40 years, Malaysia drew on its natural resources to nearly eradicate absolute poverty, from 49 percent in 1970 to 1 percent in 2014’
  12. Key data on poverty eradication 0.401 2,537 0.6 RM % Gini coefficient reduced from 0.441 in 2009 surpassing the 2015 target of 0.420 Mean B40 household income, increased from RM1,440 in 2009 Incidence of poverty in 2014, from 3.8% in 2009
  13. Bottom 40% Household Income Growth Outpacing Average Household Income Growth Note: Data for 2014 Household Income Survey are based on interim report and inflation data for 2012 is based on CPI until August 2014 Source: 11th Malaysia Plan Inflation CPI: 3% Compounded Annual Growth Rate (CAGR) of Household Income 2009 - 2014 8.8% 10.1% 12.0% 12.8% Mean Median B40 Household Income Average Household Income
  14. We implemented inclusive measures for low income people 7 million Low income households and individuals benefited from BR1M (cash transfer) 302,946 Individuals participate in the 1AZAM programme 2.9 million Lifted out of poverty due to minimum wage policy
  15. We built a record length of rural roads benefiting 3.5 million rural folks Kuala Lumpur MALAYSIA Kathmandu NEPAL 6,042km rural roads completed “Most roads built since independence”
  16. 1,681,330 people benefited from having new access to clean water 350,094 rural houses given access to clean water
  17. 720,125 rural people now have access to reliable electricity 153,821 rural houses have been electrified
  18. We achieved almost 100% literacy rates in primary schools NUMERACY RATE AVERAGE 99.0% (YEAR 3 STUDENTS, 2016) LITERACY RATE (2016) AVERAGE 97% BM PROFICIENCY FOR YEAR 3 98.6% ENGLISH PROFICIENCY FOR YEAR 3 94.8% Better literacy and numeracy rates among primary students
  19. Note: 2010 banding based on 2009 examinations; 2015 banding based on 2014 examinations 168 1,602 3,615 2,170 916 582 17 495 3191 3275 1813 1140 87 10 Band 1 Band 2 Band 3 Band 4 Band 5 Band 6 Band 7 2010 2015108% Improvement in Band 1 & 2 84% Reduction in Band 6 & 7 0.95% schools in Band 6 and 7 in 2015 vs. 6.58% in 2010 36.8% schools in Band 1 and 2 in 2015 vs. 19.44% in 2010 ..and 108% improvement in Band 1 & Band 2 schools
  20. Source: Ministry of Finance 6.7% 5.6% 4.8% 4.5% 3.9% 3.5% 3.2% 3.1% 2009 2010 2011 2012 2013 2014 2015 2020 TARGET 0% 2016 We have a law that imposes self discipline - a Govt debt ceiling of 55% of GDP Govt debt 54.5% of GDP (2015) and 52.7% of GDP (2016) We reduced fiscal deficit from 6.7% (2009) to 3.1% (2016) of GDP
  21. The Government’s Fiscal Sustainability
  22. India • Water • Crime & Safety • Governance • Education • Energy • Agriculture • Healthcare • Transport • Public finance • Healthcare • Food security • Oceans • Water • Education • Wholesale & Retail • Governance • Urban development • Crime • Governance • Low income • Rural development • Cost of living • Education • Urban public transport • Water • E&E • Business services • Financial services • OGE • Palm oil & rubber • Agriculture • Creative content & communication • Tourism • Healthcare • Wholesale & retail • Human capital Malaysia Tanzania S. Africa • Tourism • Logistics • Manufacturing • Finance • Labour • Fisheries Oman Other governments want to adopt Malaysia’s model of Transformation • Road and Transport Russia • Youth and Development Ethiopia
  23. How did we do it?
  24. Governments around the world have beautiful plans and promises…. Today’s reality…. However, the main difficulty we face is the failure to deliver….
  25. 8 implementation problems Unclear direction, not focused Lack of leadership commitment High level plans not translated into practical 3-feet programme Public demands and input not adequately heard / obtained Poor accountability…. Lack of Transparency and Trust Deficit (Public does not trust the Government) Rigid Implementation Silo mentality and work approach P1 P2 P3 P4 P5 P6 P7 P8
  26. The Simple Logic 8 Problems 8 Step Process (hard-wired) to deal with all the problem “Cherry Picking the 8 Steps leads to small & slow results” (Not BFR)
  27. New way of working: The 8-Step BFR Methodology Planning / Thinking (10%) • Strategies, Key Activities & Responsibilities • Organizing • Communication & Engagement Implementation / Doing (90%) • Monitoring • Recursive Problem Solving • Assessment / Validation • Reporting Planning / Thinking (10%) Implementation / Doing (90%)
  28. Step #1: Leadership and Strategic Workshop Facilitated multiple Cabinet retreats to ascertain the direction needed and to set the National Key Result Areas (“NKRAs”) and National Key Economic Areas (“NKEAs”) Deals with • P1: Unclear Direction • P2: Lack of Leadership Commitment
  29. NTP : GTP + ETP 7 National Key Result Areas (NKRAs) Focus Competitiveness 12 National Key Economic Areas (NKEAs) 51 Strategic Reform Initiatives (SRIs) Reducing Crime Anti-Corruption Rural Development* Urban Public Transport Low Income Household Education Cost of Living Oil, Gas & Energy Palm Oil & Rubber Financial Services Agriculture Communications Content & Infra Healthcare Business Services Tourism Education Wholesale & Retail Electrical & Electronics Greater KL Competition, Standards & Liberalisation Human Capital Development Public Finance Public Service Delivery Government’s Role in Business Narrowing Disparities * Renamed from Rural Basic Infrastructure
  30. Labs are working sessions attended by key stakeholders to establish implementation programmes to detail out what needs to be done – we call them “3feet programmes” Step #2: Facilitate Labs Deals with • P3: High Level Plans (30,000 ft) are not translated into detailed 3ft problem. • P5: Silo mentality and work approach • P7: Poor Accountability
  31. *US-Ringgit Conversion Rate at the time of the lab, 1 USD = RM3.2 ETP – Economic Transformation Programme Under the ETP, we conducted 12 labs with 500 participants over 8 weeks Private Investments (2011-2020) 131 3.3 mil (2011-2020) USD 250 bil (2020) EPPs GNI Jobs 406BillionUSD • Idris Jala – Top 10 Most Influential Policy Makers in the World (Bloomberg Market 2014) • PEMANDU – Top 20 Most Innovative Government Agencies in the World (Bloomberg Philantropies and Nesta 2014)
  32. *US-Omani Riyal Conversion Rate, 1 OMR = USD 2.6 In Oman, we identified 121 projects that would bring in USD 42 billion in private investments 121 EPPs USD 24 bil (2020) GDP 119,853 (2017-2020) Jobs Private Investments (2017-2020) 42BillionUSD Tanfeedh Programme
  33. Step #3: Conduct Open Days This is to share output from the lab and seek feedback. GTP : 8,500 people ETP : 13,000 people SRI : 5,000 people Subsidy : 2,500 people Deals with • P6: Public demands and input are not heard / obtained • P8: Lack of Transparency and Trust Deficit (Public does not trust the Gov)
  34. Step #4: Develop Roadmaps Detailed Version ETP : 601 Pages GTP : 261 pages Summarised Version ETP : 55 Pages GTP : 37 pages 6 minute video Deals with • P2: Lacking leadership commitment (“pregnancy”) • P7: Poor Accountability • P8: Lack of Transparency and Trust Deficit (Public does not trust the Gov)
  35. Step #5: Set KPIs and Targets The roadmaps were then translated into detailed KPIs and targets for the whole cabinet Deals with • P5: Silo mentality and work approach • P7: Poor Accountability
  36. The Minister has publicly committed to step down if he fails to meet his KPI for Sabah
  37. 2005 2006 2007 2008 2009 2010 3,996 4,030 1,987 1,867 2,867 687 -76% SAIDI in Sabah (2005 – 2010) To achieve this KPI, the ministry TRANSFORMED immediately – Sabah achieved SAIDI of 687 mins in Dec 2010, surpassing the target set of 700 mins
  38. Step #6: Implementation Tracking of on the ground implementation PM / Minister Review Annual Ministry Review / Cabinet Away Day This is where delivery takes place An ongoing recursive process which is tracked, monitored and problem solved at weekly, monthly, quarterly, bi- annual and annual intervals Deals with • P2 : Lacking leadership commitment (“pregnancy”) • P4 : Rigid Implementation (“Recursive”) • P5: Silo mentality and work approach • P7: Poor Accountability • P8: Lack of Transparency and Trust Deficit (Public does not trust the Gov)
  39. Step #7: Obtain External Validation External validation on results achieved Deals with • P8: Lack of Transparency and Trust Deficit (Public does not trust the Gov)
  40. Step #8: Launch Annual Reports Tell the Rakyat what we have/have not delivered Deals with • P2: Lack of Leadership Commitment • P7: Poor Accountability • P8: Lack of Transparency and Trust Deficit (Public does not trust the Gov)
  41. Thank You
  42.  Malaysia on track to become a high income economy (33% GNI gap reduced to 19%)  5 year successive record high in private investment (5.5% CAGR to 11% CAGR)  6 year successive record Government Revenue  6 year successive reduction in fiscal deficit (-6.6% to -3.1% of GDP)  Absolute / extreme poverty virtually eliminated  Record rural infrastructure development (6.2 mil lives impacted)  Record crime reduction (>45% from 2010-2015)  Record improvement in literacy / numeracy rates in Primary School (Year 1-3)  Record urban public transport ridership / modal share (13% → 20%)  Made the highest stride in economic diversification (Services sector now 55%) Key Achievements of the National Transformation Programme