Tuesday, 19 October 2010
The PM and his Budget.
Everyone was interested at listening to the Finance Minister delivering his budget speech. It was a Friday. So he was dressed in a resplendent baju Melayu. The kain samping he wore costs probably RM 40,000. I know. I was his Information Chief.
They had different reasons going for them. The big corporate boys were happy because they were probably lined up as recipients of big government contracts. The rest? They are indifferent really. If Najib as the finance minister goes around or his people go around, he and they would have a different picture.
Government servants were just waiting whether he will announce a month's bonus. Forget about whether they are 1.3 million strong. They are not a homogeneous lot. They don't give a damn about Aseh Che Mat. They don't even know that their number is 1.3 million people. Civil servants are saying during Pak Lah's time, despite being derisively referred to as sleepyhead, he managed to pay 1 month's bonus. To civil servants, Pak Lah was a good FM. When the current PM fails to do so, they regard him simply as a failure at managing the economy.
The kampong people are not interested whether toll rates will not be raised for the next 5 years. So what? They are not heavy users of the highways anyway. Also they know, the government pays toll operators compensation. PLUS for example will get billions. The going rate is RM 800 million per year. So they get RM 4 billion for not raising the toll rates. This is economic racketeering. The government pays protection money to induce toll operators not to raise rates.
Kampong people are interested only to see whether the price of rice and other essential food items go down. Cigarettes which they consumed in large quantities are wished sold, at cheaper prices. The government doesn't addressed these issues.
In general, this year's budget is received in a lukewarm manner almost nonchalant. The only people saying this is a good budget are first of all the sycophantic ministers and people who are lazy to go through the budget proposals. That includes sitting MPs.
The cynicism, Mr. PM, is pervasive.
What has the construction of a 100 storey tower got to do with the government budget? Or for that matter the construction of the RM 43 billion MRT, the RM10 billion mixed development of Sungai Buluh, the RM 26 billion construction of the KLIF hub, RM 10 billion worth of highways got to do with government budget?
These are elements of long term economic planning more suited to be incorporated in the 10th or 11th Malaysia Plan. But the budget? Hence the nagging feel that they are mentioned to spice things up even though they are not going to be financed by public money.
Year in and year out we have MPs listening to budget speeches yet no one pointed out these are components of a Malaysia Plan. Not a budget. So how could we blame Dr Mahathir when he said, the government is full of half past six people.
Maybe they are mentioned to point out that we have an ecosystem amenable to rapid economic development. The last time we had the smart partnership idea and that term was repeated countless number of times across the country. Now, we have another acronym- PPP= Public Private Partnership.
The term 'ecosystem' has since been fashionable when it was used by the PM. Accordingly, we should not be too harsh in our judgment.
Ok, let's not, but let's take a look at what other people's ecosystems have done to their economy.
The world economy is growing at an average rate of 11% but Malaysia is doing so at a rate of 6%. Why are we below average? Is our ecosystem not compatible to the world's ecosystem? This issue is not addressed.
Why is Malaysia growing slower than the world? Have we applied our revenues the sub optimal way? Will this way be repeated in 2011?
Certainly it reflects our lower level of productivity caused by various factors. Certainly that reflects our competitiveness. Singapore is growing at a rate of over 13%, China at 11 %, Thailand with its red shirt problem is growing at a rate comparable to ours.
Yet our country which is relatively free from social turbulence save perhaps from Rais Yatim's war against bloggers in general and one blogger in particular can only grow at around 6-7% for 2011. Even that , is out from an economy with negative growth. .
That is certainly a reflection of our collective management- the political leadership and the civil service. Yet the PM is rewarding the civil service with financial goodies.
Why are we in terms of managing the economy, lagging behind the other Asean countries? ( minus Timor Leste, Brunei, Laos).
A budget should be straight to the point. It addresses the sources of government revenue- taxes, dividends, royalties, interests payments, non tax revenues etc. then the various allocation to the ministries. Inflow-outflow. If there is a deficit in government revenue, the finance minister proposes how to raise the money. Then you can talk all you want about bonds, sukuk etc etc. yes, the public sector borrows money.
Gone are the days, when a Budget is presented as a strictly business affair. As in during the time when Daim Zainudin or Tengku Razaleigh presented their budgets. They did as a matter of business, not much panache but businesslike.
Of course the most outlandish presentation of a budget was during Anwar Ibrahim's time- with all those Indonesianised terms and coinage of philosophy that prompted a giggly someone now at Media Prima to proclaim Anwar was the best finance minister. Najib doesn't have to imitate Anwar with those fuzzy thinking and taking us in circles.
But to his credit, Anwar as opposition leader is better at dissecting the 2011 budget. He did so mercilessly and the BN [people were reduced to a pitiful lot saying , the opposition will and can only say bad things. The opposition is always envious- says Utusan Malaysia. I hope the PM kick these people out from being candidates the next round.
Reading the text of his take on the 2011 budget, I have to say, he has redeemed himself and revealed a very analytical side of him. He did learn something afterall during his stint as FM while playing tennis(sometimes) with Nala Karuppan.
Repeat: what is a budget? A budget addresses the issue of sources of government revenue and allocation to the various ministries. Who wrote this budget for Najib? This is why in my previous article, I wrote the budget is as good as the people writing it, and because it wasn't written by Nobel laureates of economists, someone like I who pretend to be an economist, can debate them.
For the 2011 budget, we are incurring a another deficit for the 13th year. That's 13 consecutive years. We are spending more than we earned. Spending is of course not necessarily bad if its directed at building capacity, enhancing competitiveness and so forth. But it will be a cause of concern if much of that spending is absorbed into activities that sapped our competitiveness or that does not add to our capacity building.
Suppose you want to build the 100 storey building. The government wants to do it. Then it lays down how it's going to raise the finance. In this case, PNB is going to do it. That's a private affair. How does that figure in a government budget?
Then there is the RM 43 billion MRT. It's going to be built using private finance. How does it figure in this government budget? Does the government get money from this project? The land on long lease provide revenues for the government? Then of course that will a source of revenue for Mr. G. does government has equity in the project? Mr. G is Mr Government nor G Palanivel. That's the chap who wants to be minister.
It then has a stream of dividends from it. That is revenue. Unless these elements are there, it's part of the budget.
Because it's going to be built by Gamuda and MMC- that's their affair. Nothing to do with this budget. The development of the Sungai Besi? What does the government get in return? Proceeds from the sale of the land? Dividends from its equity? The government invests through 1MDB which has no experience in developing a piece of real estate. It ropes in Desmond Lim who built the Pavilion. Its bringing in the Mudabala Group, another private sector initiative.
Similarly with the development of the Sungai Buloh area. What does the government get? If they get anything, whatever they get is part of government budget. Otherwise all these things Najib mentioned are all part of a long term business plan for Malaysia. a business Plan is not the government budget.
It makes many think- why does PM Najib list down all these business plans which have nothing to do with the government budget? These are elements of long term business plan, not elements of a budget. The answer I suspect is to invoke a sense of feel good or even worse, as red herring to conceal the real subject matter of the 2011 budget.
What's the deal?
We are taking out from the consolidated fund some 212 billion Ringgit. How is it applied?
The government is spending around 77% on OPEX. The bulk of the rising OPEX to cater mainly for 1.3 million civil servants and handouts to the party supporters in the form of JKKK members and RELA recruits. That leaves some 23% for development expenditure and the building of capacity.
How is the spending financed? The government will borrow around 22% and the rest is financed by tax and non tax revenues.
This is the second year he has prepared a budget. This year he has launched a series of ,let's say, "ideas" about long term planning. The New Economic Model. I asked him once- what is it essentially? It's a model to launch Malaysia into a high income economy. How do you reconcile that with demands by groups like Perkasa, I asked? There will still be emphasis on Malay economic interests he said. But it has to be based on merits- market driven affirmative actions.
In case you are wondering- I get to ask the PM when I get a chance to see him. I was his ADUN before and served as his division's information chief for 4 years. So despite my open criticisms, I do get to see him off and on.
Then we have heard all the acronyms. GTP, NKRA, NKEA, PPP, and finally ETP. The list seems to go on and on. Never-ending. Never muktamad. No finality. Here is I what I think. It's true that too much of a thing, will land us into trouble.
You see, all these are elements of long term planning. If I were a professor and student Najib prepares me a budget like this, he will barely passed.
He is suffering from Acronymitis. It's a new disease I suppose which has become fashionable since Najib took over from Pak Lah. And we are seeing its deleterious effects when the PM/Finance Minister prepared the 2011 budget recently. He is suffering from an economics heatstroke I think.
Can you back up your claim? What is a budget if I may asked you. a budget is essentially an address on government revenues and application of that revenue. How much is allocated to government ministries. It's about the finances of the government. Hence all those things about the construction of the 100 storey tall building for example is nor relevant. It's not the government's money. The money does not come from government revenue.Najib must not confuse a Budget with long term economic plans.