The 2012 Budget- A Crowd Pleaser

Let us speak with openness. Can we expect the over RM 4 billion to be spent as handouts, one off at that, be expected to be a principal transformative element of the 2012 budget? Out of the 232 billion, 180 billion will be spent as OPEX. That’s money to spend on operating the economy; paying salaries, servicing existing loans etc. Can that be the transformative ingredient? That leaves 50 billion as CAPEX.

Now as I understand it, to transform an economy, we must have capacity; i.e. we need to spend on building capacity and capabilities. Capital formation, building skills and technology. These now are uncertain given that even allocation to education is being reduced. We are simply held back from transforming because we hold back on building capacity and capabilities.

We are doing exactly the reverse. We are preaching that in this world, we DO have free lunches. We are entrenching the rent seeking mentality- things can be had for free and without efforts, as long as we install a benevolent despotic and overbearing government. Ignore the bullying; ignore the excesses because what are important, impoverished people can be made a happy and contented lot once a year when the budget is announced. Let people think, budget time, is when the giant ATM machine is taken out.

You get the feeling that the finance minister when presenting the budget the other day, can’t wait to get to the paragraphs where he gets to play Santa Claus. He rushes over the paras telling stories about capital market, restructuring the rural economy. He’s over eager to come to telling the story about how he plans to easing and pleasing people facing the world of rising prices. 
To be sure, Najib likes to give money. There must be a psychological term to describe the feelings when a person gives out money to other people- that particular categorization of people who feel empowered or even smugly superior when giving money to the other people. Perhaps that reinforces the ruling class complex, no?  You servant, me master ya?

I find disingenuous this argument:

With these developments, the Government will put in place measures to stimulate domestic economic activities, in particular public and private investments, as well as private consumption. Private and public investments are expected to increase 15.9 per cent and 7 per cent, respectively, supported by higher foreign direct investment, implementation of the ETP and Second Rolling Plan (RP2) projects under the Tenth Malaysia Plan (10MP). Private consumption is projected to increase 7.1 per cent following higher disposable income and a more positive employment prospect. On the supply side, the services sector is expected to expand 6.5 per cent, while the construction sector 7 per cent. Therefore, economic growth in 2012 is projected between 5 per cent and 6 per cent.

How? What are the measures? The vanguard for our development (unspoken of course) seems to be those large companies given projects under the ETP- hence the implementation of the ETP and a continuation of the projects under the previous budget.

The ETP is of course just the marketing arm of big business using the government as a front. I have written some time ago, the ETP coordinator or convener as it really is, just called up for the business plans of the big companies in Malaysia, re-package them, given a brush over by the McKinsey boys, and hey presto- held it out as THE business Plan for Malaysia.  Somehow naming it ETP will miraculously transform Malaysia. It does- it transforms rich companies to mega rich companies. Hence the idea of the NKEas- national key economic areas are prima facie good and worthy thinking- but assigning them to selected PDP is something else. The PDPs happen to be the very companies asked to give inputs into the ETP.  They get to be richer beyond the imagination of us mere mortals.  To have this idea that the government, attributed with omnipotent qualities, is able to efficiently micromanage the economy, replacing the free play of market forces is incredible. This is the fatal conceit on the part of the government.

Therefore you find Gamuda (who was the originator of the idea of MRT) remains in fact, the project coordinator for the cost yet to be ascertained MRT project. It has now become MyRT? What’s that? From a PFI project it’s now a 100% owned project under the government’s MRT corp? Gamuda gets to build the RM 12 billion tunnel using cheap loans guaranteed by the government? It gets a 3% rate where the difference between that and the market interest rate is paid for by the government? So what was the real MRT plan? A business package to be parceled out to a few selected companies? Gamuda gets lion’s share by way of direct negotiation- while a single package of the business is to be competed out by 20 Bumi companies. The big one you give out directly, the smaller ones you let the smaller boys fight it out.

What’s actually a rolling plan? Are they projects that were supposed to be implemented last year but counted once again as new projects this year? Then they shouldn’t be included in a new budget year. It means the government didn’t have the discipline to make the projects take off in the relevant financial year.  What exactly is the employment figures that is mentioned as an increasing disposable income agent?

He doesn’t tackle the ways to actually reduce the price at source. He talks about giving money directly into the hands of sections of the people, who are probably identified by the welfare department or ministry. Come to think of it, the people identifiable and qualifying as welfare recipients must have come from Sharizat’s ministry. (Didn’t she announce that a person able to see with one eye only is now qualified to receive welfare assistance because the one eyed fellow is now an OKU?).

What if the price of oil is lower than expected? What if, given the state of the world next year experiencing slower growth all around, we can’t export as much as we want? The IMF reports that slowdowns of economic growth in Europe and USA will have contagion effects where funds will be taken out of Asian economies. Are these developments not taken into account when budget 2012 was being prepared? Was this element left out when the Finance Minister quoted IMF in his speech?

What if domestic demand isn’t sufficient to absorb our excess capacity? MIER has revised Malaysia’s growth rate to below 5% throwing doubts to the finance minister’s claims that our growth rate will be around 5-6%. Never in our history, has a credible research organization such as MIER come out immediately after the budget to cast doubts as to the veracity of the finance minister’s numbers.  Where did those numbers come from? MIER said domestic growth is not sufficient to counter shrinkage in external demand.

See? Our economic optimism is based on external demand. External demand pushes up our exports. If other economies face problems, they reduce their imports. Our other major export earnings from the sale of oil are another problem area. Other countries buy our oil. If we cannot sell as much export like we want and the price of oil drops, then our income will be greatly reduced. We don’t have a large domestic market. If the high impact projects do not take off as planned, no money is going into the market. The RM 4 billon pus that’s going directly into consumers is not going to create much impact as it can be reasonably expected; the money will be used to satisfy deferred spending.

That’s a substantial reduction in percentage points translating into large actual shrinkage in the economy. The income of the country will be lower than projected and the country will grow at a rate less than stated. Producers cut back because those entire one off handouts or large portions are used to satisfy deferred consumption clearing old inventories. New demand is too weak to stimulate production. Domestic demand is cut back as is external demand because each economy in the world is caught out in its own recessionary phase.

These are the realities possibly emerging independent of the PM’s recent budget projections.  How could the Malaysian economy be saved? Possibly by our leader bringing in money into this country. and the money is given out to investors and consumers. Producers get access to cheaper funds. Government spends its way out of recession in ways that cut away at lag times. Consumers given sending coupons to prevent hoarding up. The finance minister is doing it already to students right? Money must circulate in the economy to stimulate domestic demand.

The 2012 budget is indeed the most unique. Never before has a budget been turned into a huge CDM- cash dispensing machine. Money into our hands is a welcome relief and pain remover; but it’s not a responsible way of managing a country’s budget. This is the most irresponsible budget that I have ever heard. The complex and real economic determinants are rushed over in order to allow the finance more space to act Santa Clausian.

It’s more notable for handing out cash instead of putting the economy in order. The capital market is mentioned as in passing; as though some phone calls were made to leading bankers in Malaysia to give some inputs on the capital market. Hence just a cursory almost text book mention that our ratio is strong and better the world average. So? How does that translate into accessibility of the SMEs to the capital market? How do we ease imports of capital goods into the country to build capacity? Isn’t the theme of this budget is transformation?

 Its more notable for its explicit take my money and vote for me posturing. Because all the disposable incomes because they are one off events suggest that they are given for the purpose of inducing the recipients to vote for the government.  I am sure there is a simpler term for that- bribery?