The unveiling of the ETP Annual Report was an opportunityfor the Government to trumpet  its  2011 success stories.  Despite  the criticisms, the ETP  is  still the best framework for a discussion onMalaysia among  foreign investors. Infact, we see the ETP bearing fruit towards end-2012, thus justifying our callto acquire Construction, O&G and Banking stocks, especially in 2H2012. 2013should be a brighter year as infrastructure investments  in  theMRT, Double Track and RAPID  projectsgenerate strong multiplier effects. For now, however, we remain NEUTRAL on theMalaysian market given the risk of a mid-year market retracement. Our year-endKLCI target of 1,620 pts remains.

PM puts  GTP in the spotlight.  At the launch of the  GTP and ETP's 2011 Annual Reports yesterday, the Prime Minister rightly spent moretime focusing on the GTP, which has a broader impact on the 'rakyat' and whichis driven by the Government.

PEMANDU highlightsthe SRIs. At a separate briefing, PEMANDU chose to focus more on the StrategicReform Initiatives (SRIs), which are  enablers in thetransformation of the Malaysian economy. This was to deflect criticism that theETP was too focused on private sector projects without looking at propereconomic reform.  The success storiesamong the SRIs included the cancelation or simplification of 52% of thelicences needed to run a business in Malaysia, reducing the budget deficit to5% and continued efforts by the Government to pare down its stake in businessesthat it currently owns.

ETP achieves broadgoals. For 2011, the ETP achieved its broad goals, with GNI at RM830bn vsthe targeted RM797bn, private investment totaling  RM94bn vs  the targeted RM83bn, and 313,741 jobs committed vs  the 330,000  targeted. All the  NKEAs achieved varying degrees of successwith regard to KPIs that were scheduled for tracking in 2011. Special mentiongoes to the Agriculture NKEA for admitting that a number of its EPPs such ascattle rearing in palm oil estates and feedlot farms did not justify theinvestments needed and thus, would not see further developments going forward.

The key ETP beneficiaries.In the Annual Report, the usual broad-based targets of increasing broadbandpenetration, oil extraction and palm oil yield were highlighted again. Ratherthan dwelling on these well-known targets, we choose to highlight a fewspecific plans moving forward that could benefit a few specific companies,including:

Still the Best we'veGot. All in, despite the criticisms leveled at it and the challenges itfaces, we believe the ETP is still the best economic programme that Malaysiahas seen.

PM focuses on GTP. During the launch of the 2011 Annual Reports for the GovernmentTransformation Programme (GTP) and the Economic Transformation Programme (ETP),the Prime Minister naturally dedicated more time in his speech to the GTP. Thisis because the GTP is a Government-led initiative aimed at improving thequality of life for the broad spectrum of Malaysians in the areas of:

1. Cost of Living ' where the Government touted the variousrelief efforts it had  undertaken in  2011,including one-off cash payments to theneedy, affordable housing schemes and continued subsidies.

2. Crime Rate ' where the GTP has led to an 11% drop inoverall crime and 39% drop in street crime since 2009.

3. Education ' where the efforts to build up the capacity ofMalaysia's pre-school education have led to 77% of Malaysian children nowattending pre-school.

4. Rural Basic Infrastructure ' where the most rural roadstargeted to be built over a 2-year period was achieved over 2010 and 2011.

5. Public Transportation ' where the MRT, LRT enhancement and the Double-trackrailway were touted.

6. Low Income Households ' where 44,000 households werelifted from hardcore poverty.

7. Corruption ' where a total of 900 offenders wereconvicted in 2011.

Going forward, the GTP will focus on the RuralTransformation Programme, which will be unveiled soon.

PEMANDU zooms in onSRIs. Separately, the Performance Management and Delivery Unit (PEMANDU)held another briefing on the progress of the ETP. At this briefing, PEMANDUfocused more on the Strategic Reform Initiatives (SRIs) to help correct themisperception that it was overly project-focused given that aside from the SRIs,the ETP comprises mainly the Entry Point Projects (EPPs) and BusinessOpportunities (BOs) that appeal more  toinvestors. Within the 6 SRIs, PEMANDU highlighted a number of success storiesin reforming Malaysia's economic landscape to make it more competitive. Theseare:

1. Competition, Standards and Liberalisation ' TheCompetition Act came into force on 1 Jan 2012 and 8 services sub-sectors fullyliberalized.

2. Public Finance ' The budget deficit was further reducedto 5% in 2011 against a target of 5.4%. The target for 2012 is 4.7%.

3. Public Service Delivery ' 405 licences will be simplifiedor eliminated  by June 2012,  thus eliminating 52% of the licences requiredto do business in Malaysia.

4. Human Capital Development ' TalentCorp continues its workof attracting talented Malaysians to return.

5. Government's role in Business ' The Government will paredown its stake in another 5 Government-Linked Companies (GLCs) and sell itsstake in another 8 companies this year.

6. Narrowing Disparities ' Agencies such as TERAJU willcontinue their work of identifying and encouraging deserving Bumiputera SMEs. ETPachieves its targets. In the broader picture, the ETP has achieved its maintargets in the areas of :

- Gross National Income ' where Malaysia's GNI reachedRM830bn in 2011 vs the targeted RM797bn.

- Private Investment ' Malaysia  drew RM94bn  in private investments in2011 vs the targeted RM83bn.

- Jobs Committed ' Malaysia saw 313,741 jobs being committedvs the 330,000 targeted.

In terms of the EPPs within the 12 National Key EconomicAreas (NKEAs), the achievements were as highlighted in Figure 1.

Source: OSK188