Busted! The Myth of the Rising Per Capita Income

Newspaper cutting from Cakap Tak Serupa Bikin blog

Tan Sri Nor Mohamed Yakcop, Minister of Finance II claimed in Penang Saturday that the Per Capita Income rose by 40% throughout the premiership of Dato Seri Abdullah Ahmad Badawi. With the economy in such a pathetic state for the past few years, does that make sense?

Mind you, this is not the first strange economic numbers churned by the Treasury. Last year saw an avalanche of ridiculously big numbers – RM1 trillion total trade, unfathomable amount of projects and planned spending, and the world’s first ranged economic forecast for Budget 2008.

That’s last year and Cakap Tak Serupa Bikin blog made a good compilation of those Carl Sagan-ic numbers. Remember his trademark “…billions and billions of stars and planets ...”.

Since last year, economic observers may have been seeing stars from the dizzying height of economic spinning. It has gotten worse. The MoF claimed that Malaysia is the world’s 6th most competitive nation, but it turned out Malaysia’s rank worsened by 1 to 23. Don’t tell me someone wrongly advised the MoF. Anyone with any economic common sense will know it is ridiculous!

The misleading information and factual errors coming out from Minister of Finance I & II is putting the country in danger. General Election or not, I am not about to take this crap. This calls for the job of the Economic Myth Buster!

Nor Yakcop claimed that per capita income rose from RM15,819 (2004) to RM22,345 (2007). Looking at the Stats Dept website, the 2007 numbers look fine but still suspiciously unreal.


You don’t call the Economic Mythbuster for nothing, do you?

Per Capita Income (PCI) (sometimes called National Income or Personal Income) is derived by dividing the Gross Domestic Product (GDP) by the population. There are number reasons to believe Nor Yakcop’s claim as suspicious.

• If the population is assumed as not growing, our GDP should rise by 40% from 2004 to 2007. That is not true since the Ministry of Finance reported growth for 2005, 2006 and 2007 at 5.0%, 5.9% and estimated 6.0%, respectively. That’s only a simple total of GDP growth of 16.9%.

• Since Stat Dept. reported Malaysian population rose from 25.58 million (2004) to 27.17 million (2007), such 40% PCI increase can only be achieved with a GDP growth of a whopping 50%!

• Tony Pua is of the view that 40% PCI increase can only be achieved if “our population shrunk by some 16%!”

• He added that “To achieve 40% growth, Malaysia must be growing in excess of 12% per annum”. Since our annual population growth is mere 2%, “… that will actually make Malaysia the fastest growing economy in Asia, outstripping even China and India.”

Yummy! Now for the spinning and misrepresentation part.

By calculating backward the population and the number mentioned in Nor Yakcop’s statement, one could derive the GDP figure as RM607.1 billion (2007) and RM404.7 (2004).

Is the GDP number correct?

Gross Domestic Product represents the total amount of goods and services transacted in the domestic economy. Since it is based on purchasers’ price, the GDP and PCI figure depends on what price is used. If it is based on actual or current prices, it would be as per the table below:


However, that does not reflect the effective or real GDP economic growth. The number may have grown because of rising prices (which is actually happening) and not actually due to more economic transaction. Economist would usually calculate based on the price level at a certain benchmark year.

Using the year 2000 as benchmark, our figures becomes as below:


Wait a minute; I know what you are going to say when you see 3-year PCI is 11%. Step by step please.

All the figures are then compiled below:


Nor Yakcop seemed to have lowered the 2004 GDP by using inflation-adjusted constant price figure. Whilst, the 2007 GDP figure seemed to be increased by using non-inflation-adjusted current price figures. In simple word, there was the manipulation to lower the smaller figure and raising the larger number.

Wow, it reminds me of the ECM Libra and Avenue Merger!

Apart from the suspiciously fraudulent figure, there are other observations that can be derived:

• By the simple calculation to subtract 11.0% from 24.1% PCI figures, it could mean that inflation is about 13.1% or by a simple averaging over 3 years of 4.4% p.a. Does it make sense that our annual inflation is claimed as only around 2-3% p.a.?

• With an average population growth of 2% p.a., growth of an average 6% is a pathetic economic management, isn’t it? Imagine, if Malaysia is not an oil producer?

You are Busted, Nor Yakcop!

Over to partner Lara Croft. Deal with em, Lara.

Foreign investors and corporate business rely on economic stats and statements from officials for decision making and planning.

Spinning economic figure is a misrepresentation of the true economic situation of the country. Such unethical practise puts a bad light on the integrity of our Government and leaders.

It would be extremely difficult to convince and attract investment from investors that already distrust the credibility of the officials. That is only the case of spinning but the MoF I & II is now caught for outright lying!

Some apologist may say that MoF I is there merely to reduce political squabbling for the coveted position. Abdullah should be excused since he is not trained in economics. It is believed he failed in his statistics, flunked out of the University Malaya's Economics Faculty, and switch and graduate in Islamic studies.

If that excuse is accepted, it is incumbent on Nor Yakcop to provide the proper advice. He possesses an MBA from INSEAP and served BNM for many years. As one fluent in foreign exchange, he is expected to be familiar with economics – if not developmental economics or political economy or econometric, the least is basic macroeconomics. Instead of correcting the lies, he is now part and parcel of it.

There are many well trained personnel in EPU. Are they both utilising the expertise within the Ministry such as Wharton-trained economist Deputy MoF, Dato Dr Awang Adek Hussein and within the Civil Service? Or merely listening to the inexperienced legal and accounting-trained Tingkat 4 boys!

With or without the advice, MoF I & II must have the common sense to appreciate and understand the numbers. This is outright incompetence. The Prime Minister should not be holding this post if he is inadequate to carryout his responsibility and unfit to supervise his subordinates. He should appoint someone truly capable as Minister of Finance.

For Nor Yakcop, he should resign for making those outright lies! He has stretch his good luck far enough since the gigantum loss in hi smanagement of the nation’s foreign reserve.

That’s enough, Lara. You can follow me home now.