Tuesday, 22 October 2013

The 2014 Budget: Plugging the Leakages, Ending Crony Capitalism as We Know It.



As we prepare for the 2014 Budget, there are a few things to bear in mind. Malaysia has gotten a downgrading by Fitch Rating from stable to negative. This is a reflection of a decrease in confidence on how the Malaysian economy is managed. Public debt I believe by now would already touch the 55% legislative ceiling; the government should stop talking as if placing the 55% limit comes out from the goodness of their heart. We put a ceiling on the debt in proportion to GDP because its pragmatic to do so and because it is good business. And don’t insult our intelligence by comparing our debt levels with other economies such as Singapore for example. Per capita wise, Singapore is the richest country and its economy has the ability to pay.
We have had deficit budgets for 16-17 years in a row. Each year we top up our budget outlay with 40-50billion deficit which of course adds up to public debt. Our debt service amount is RM20 billion a year.
We have reached a trillion Ringgit- economy. Maybe around 1100 billion already. Our economy is projected to grow 4-5% a year and maybe more.
So what is our problem actually?
We have a SPENDING problem not A REVENUE problem.
What’s wrong with our spending? First there are the unmitigated leakages due to incompetence (the favourite excuse), misappropriation and plain corruption. These leakages amount to Rm20 billion a year as the latest Auditor General’s Report says.
Which brings us to the most important issue:  working to end crony capitalism as we know it. How to end it?
The clueless BN parliamentarians especially those from UMNO will say, we can remedy it by having more oversight supervision. They are always asking for the proof. This kind of answer is similar to the boat captain saying we will now form a committee even as the boat is sinking.
I remember one BN MP telling parliament that according to one report he cited, the Report says out of so many respondents only a small number said they have seen corruption taking place. I wasn’t sure whether he said this in jest or he was simply misleading everyone. Tell me, has anyone who is about to pay off somebody ever tell other people to witness the wrongdoing so that the others can affirm that corruption has indeed taken place?
His stock in trade answer confirms the observation that the government has gone to bed with the perpetrators( the corporate denizens, the little stalins and napoleons) which makes the proposal to have more oversight supervision meaningless.
What is crony capitalism really?  First, let’s see how it’s reflected. In USA during the bailouts of 2008-2009, large financial firms and their creditors were bailed out and small businesses were left to run the gauntlet of bankruptcies and families were forced from their homes in foreclosure. The big boys get helped out; the small boys were left out to hang. That’s a reflection of crony capitalism.
So what is crony capitalism- to economists it’s the power of government and the rule of men in direct opposite to the power of the market and the rule of law. A more specific version of crony capitalism is what economist term as regulatory capture : the tendency for the ‘adopted’ businesses and their adopter(the government) to develop mutually beneficial relations which profit them but impose losses on the community.
The benefits to the ‘adopted’ sons may include such things like lax supervision ( the close one eye or both eyes practice) , protection from competitions or monopoly and of course bailouts. The benefits to the adoptive parents include post-government employment, lucrative retirement plans, political contributions while in power including being sent 300 cows for hari raya korban, favours to family and friends either explicit or implicit. Crony capitalism exists in any kind of industry as long as the long arm of government regulations extend and this provide discretionary rulings by government officials. For firms not adopted, they face government cannibalism.

4 comments:

Roti Sunshine 22 October 2013 at 16:50  

Dear Sak,
As usual, you are at your analytical best. As regards public debt, uninformed people think that all debts are bad. Not necessarly so if the debts are put to good use. If debts are used to indulge in consumer goods then it may not be such a good thing if the same debts are used to buy capital goods to create economic growth.

As regards Singapore's public debts,the government over there buys debts from its people and in turn used the funds to to set up investment companies like Temasek to buy into leading companies of the world.

Of course,the governemnt there can do nothing and allow its people to dabble in shares the world's leading stock exchanges can offer on their own.

In conclusion before any BN chaps jump into the fray and compare Malaysia's public debts ratio with Singapore, let's compare the returns on those debts.

Anonymous,  22 October 2013 at 18:22  

Part of the posting by Dr. M.Bakri Musa, Morgan-Hill, California in Din Merican's blog dated 21 Oct 2013, titled, "Sudah lah ‘Jib! You Haven’t Got it!:

Third Rate Leadership

Back to Najib’s third-rate Third World leadership tricks, his most recent – and most expensive – was the junket that took him through San Francisco on his way to New York. That was literally around the world. Rest assured there will be many more such trips in his ultra-luxurious, custom-fitted full-sized Airbus jet, burning the rakyat’s precious ringgit.

The only saving grace this time was his uncharacteristic prudence financially in landing his jet at Oakland instead of at the exorbitantly expensive SFO. Najib however, more than made that up by staying at the Fairmont Hotel in a suite that would have pleased the likes of King Saud.

In the 1960s, traveling extensively abroad was also the favorite refuge for Indonesia’s Sukarno. It was left to his ministers back home to tell the rakyat to eat rats and thereby simultaneously solve two problems – widespread starvation and rat infestation.

More recently there was the example of Tunisian leader Zine el Abidene, now languishing somewhere in the Saudi desert with only his ill-gotten wealth to sustain him. Meanwhile he faces a death sentence at home and the Interpol has a search warrant for him. As for his wildly extravagant and obscenely ostentatious wife, a former hairdresser, she too has long ago abandoned him. She is also on the Interpol list for money laundering. Take a glimpse of her during her heyday; she has the uncanny resemblance of someone familiar to Malaysians, and not just in facial features.

Sukarnos’s fate in contrast was less severe. At least he died and was buried in his native land. Something for Najib to ponder!...

Anonymous,  22 October 2013 at 20:16  

And GST to them is loose change in rupiah or rupee !

Najib, his gang of ministers, economists, bankers, so – called professors, publicists in the social media controlled by the government, etc are working around the clock and in synchronization at brainwashing the rakyat about the benefits of implmenting the GST and comparing it to a developed neigbhboring country such as Singapore. More like a compulsive disorder of tipulogi / blufflogy to bail Najib’s and gang out for overspending our tax contributions for their private leisures, overseas travel, their political functions, campaigns , their “ winning ” of the recent election and the by - elections, the BRM1, the many enormous screwed - up projects and merges, paying the crews of many political sandiwara, etc.

The medium income, the low income, the unemployed, the retirees and the poor are the vulnerable groups. The domino effects on the medium and low income groups will have to pay higher prices for things and services which will then cut into their tight monthly budgets. In the aftermath, it will curtail their contribution of money and time ( they need to work so much harder ) in assisting the underprivileged in our communities and the NGOs. The whole cycle of the collapse will hit Malaysians harder.

However, Najib and gang and the wealthy will not be affected in any way, as the former and their wives do demand and receive massive freebies, a lot of their expenditures are sponsored, and the wealthy elites consist of 10 percent ( ? ) of the population of Malaysia. And GST to them is loose change dished out from the obsene money they make in their investments to generate multi - tiered wealth from non collateral loans and easy bank loans and alliances in phenomenal amount.

The rest of us - Malaysians will have to “ ternganga ” and pay huge monthly bills. Mamak chetties, ah longs and whoever will soon be back in brisk business despite the Op Cantas ( ? )

bumi-non-malay 23 October 2013 at 06:11  

Masa UMNO ditubuhkan Jumlah Melayu malaysia 4 juta... 4 juta bangsa lain termasuk orang bumiputera tulin Sabah Sarawak...

Kerana takut melayu hapus ...Pecat Singapura jadi Jumlah melayu 4 Juta ... Jumlah bangsa lain 3 Juta....Sultan & UMNO happy...boleh Kontrol Semua Hak Korrupsi...

Melayu dijanji Taraf hidup akan Naik dan jadi bangsa dan tamadun yang akan diCEMBURI DUNIA....Hisup Melayu...Hidup Islam......1965...

Fast forward 2013...melayu UMNO Panik....Apa lagi Cina mahu....apa lagi Sabah/Sarawak Mahu.... Allah tak boleh kat Malaya, Boleh Kat Sabah/Sarawak...@#$%^&!....Siapa lagi beli Ponzi UMNO akan rasa kepahitan tak lama lagi......Melayu yang perlu Hapuskan Agenda Racis UMNO Semalam....tunggu sehari lagi....Maruah melayu akan LAGI tergadai!!....

Agenda 2013 pecat malaya, pecat UMNO...Era Baru!!

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