Budget 2012- hardly transformative

Here is the reason why PM Najib isn’t heeding the unsolicited talking-tos and advice of Dr Mahathir. He has that one tool which he thinks can earn the loyalty and allegiance of people who will ensure BN stays in power. The BUDGET.  

It’s themed as a transformative budget. The only transformative feature in a budget described to induce that effect, is converting a cashless person to a person with some cash through a sudden but temporary windfall. The jaga who is a former home-guard will get a RM 3000 windfall after which he remains a jaga to sustain a living.

The language used is the language of a gambler. Hence, his minders leaked information that this is a break the bank budget, a language more suited to the roulette table. The house doesn’t have sufficient funds to cover the value of the chips on the table. Yet it lets people win to encourage more to play at the table. Because in most cases the house eventually wins, so the PM’s minders reasoned, that law will also operate on the 2012 budget. So spend.

PM Najib is gambling. Create the illusion that voters can win by getting money now, while the house is depleting itself. But in the end because the house usually wins, Najib is going ahead to spend. At around the same time, a former PM who was also a former finance minister also never known for fiscal frugality, warned the west not to spend in denial. Was he also targeting our current PM?  In a world set upon by slower economic growth, where do we sell our exports? Can we maintain our price of oil and gas to ensure we have enough funds to finance the 2012 budget?

These seem to worry the finance minister the least for now. So, he will and can call elections anytime. Best, call it before the end of the year. But then, UMNO people are just going through the drill attending courses here and there. The UMNO Assembly is slotted sometime at the end of the year. The PM is leaving for Hajj pilgrimage for about two weeks. Perhaps there he will be seeking divine signs on the dates to hold elections. God is on BN’s side just as God is a Republican in USA.  It’s impossible not to win.  I will say, the elections will be around March 2012.

In recent years, the budget instead of being a solemn account of what the government earns and how it will apply and appoint the revenue has become Santa Claus’s bag of goodies. The 2012 budget breaks all barriers- all social groups conceivable by the finance minister and the group which prepared the budget are included as recipients of some sort of money. It pays everyone to secure their vote.

How the nation’s budget is employed is not dissimilar from the way the Ketua Bahagian UMNO of Pekan sorts out problems in Pekan- pay every damn person.  That’s a small way to make people forget about the trials and tribulations of life- the rising prices of food stuffs and goods, the horrendous levels of corruption and abuse of office for self-aggrandizement, the unfair distribution of wealth, the rapacious profiteering around government projects, the arrogance of those in power.

The 2012 budget gives a pain killer to treat a more troublesome agony. With all the money that is going to be given out, the country will have excess liquidity unless it has the absorptive capacity. So where is the buildup of productive capacity to absorb the excess liquidity that will surely add to inflationary pressures? What we see is a catalog of spending and not much information on an overall plan to do justice to the 2012 budget theme- to transform society. Mr Finance minister, Mr Optimus Prime falls short here.

 How do you do that? We can achieve that transformative agenda by building capacity, cultivating skills and other productive enhancing capabilities. We are deluged with the overzealous desire to hand out money to all sorts of people. Indeed, we appreciate and salute the sacrifices of the home-guards, special constables and so on giving them RM 3000 one off payment. That’s RM 500 per month if you earn a salary of a jaga which will last you for 6 months.  The retraining scheme of our servicemen who serve no longer than 21 years has been an ongoing program since so many years back. So, it’s just a re statement of an existing plan.

There is always this funfair atmosphere surrounding the presentation of our national budget. Everyone thumps the table upon hearing this group will receive a one off payment, that group another lump sum payment. The loudest response of course came when PM announce MP’s allowance will also be revised. A budget is a solemn document. It’s an account of how much this country earned as revenue, its sources and then the proposals to commit that income. It’s a revelation one the exercise of financial management and discipline. Those are the things we must direct our attention to.

For example, everyone clapped when the finance minister said; this year’s budget is a lower proportion of our GDP. Yes, but isn’t our GDP this year bigger than last year’s?  Look at the absolute figure too. It’s still a deficit suggesting perhaps financial indiscipline and even worse unjustifiable leakages.  Have the leakages been dealt with?

The budget is humongous — RM232.8 billion which is a lot of money, especially with a 9.4 per cent rise in expenditure. Despite the country’s deficit being reduced to 4.7 per cent from 5.4 per cent of GDP, the fact remains that in terms of absolute mount, it would be the biggest deficit in Malaysian history. Biggest deficit.

Our growth rate of 5-6 %? Malaysia should be performing a miracle next year. Our finance minister is confident that Malaysia will do a 5-6% growth rate, whereas the world will grow from a negative figure to maybe 3% max. So is the 5-6% growth rate realistic and achievable?  Or is our finance minister confidently pulling wool over our eyes?

Please tell me- when is it, during the 50 over budgets presented have we ever heard the commentaries that followed the budget ever described the budget in negative terms? The analysts sometime behave like children just given some lollipops gushing with uncontrollable exuberance.

Before the 2008 elections, Pak Lah presented the budget in much the same way- giving out goodies to everyone he can capture in the dragnet, yet it didn’t stop the BN losing a large number of seats. So when friends told and confided in me, then the 2012 budget strikes fear in the hearts of the opposition, I told them to let the realities of the budget sink in first. Similar feelings were evident after the budget before the 2008 GE.

I don’t watch TV at all during a budget presentation preferring to listen to old school radio. Listening to just a verbal presentation, excludes the urge to agree on account of facial expressions, speech giving antics and so forth. Also I usually refrain from giving a spontaneous response again preferring further analysis of the budget. People can easily be overwhelmed by the feel good nature of an election budget. Did I say an election budget?

That’s what it is really despite the DPM’s usual dour rejection to suggestions that it is. But nowadays not many people take the DPM seriously. So we can excuse his monotonal warnings and posturing.

Nowadays people are easily charmed by the form by which the budget is presented. Hence people will comment on the language used by the PM,  the way he presented it and so forth. This reminded me of the time when Anwar Ibrahim was the finance minister. He presented his budget quoting phrases from the Quran, almost all  the philosophers known and read by him, used new phrases- prompting Johan Jaafar, then head honcho of Utusan Malaysia then, to describe Anwar Ibrahim as our best finance minister. We could almost imagine Johan Jaafar getting wet in the pants when describing Anwar Ibrahim as such. Today, Johan Jaafar is of course ensconced in the bowels of BN’s media citadel somewhere. If he were asked to describe PM Najib yesterday when presenting the budget, he will likely do so with the same awed glorification.

I don’t understand why there is so much hype around a budget unveiling. It seems the politics is more important then the contents, ramifications and implications of a budget. It’s also erroneously used as a platform to announce a slew of projects which has nothing to do with a budget.  But this year, we are spared the announcement of construction of towers by PUNB, Felda and so forth. The finance minister stays close to the script.  The budget is an account of money coming in and where the money is going. That’s it. Then the issues and factors that have affected the coming ins and going outs.

How has he addressed the issue of rising cost of living? People are skeptical about the official inflation rate said to be around 5%. What goods and services are contained in the basket of goods chosen by bank Negara? One year ago 1 kilo of ikan kembong was 60% cheaper. So inflation can’t be 5%. The most important goods and services which the public are looking at are the price of foodstuffs- easily rising beyond 5%, education, housing, transport, cost of fuels etc. inflation just can’t be around 5%.  Will the disposable cash increases all around tackle the root cause of rising prices?

What’s the cause of rice shortages that forces us to incur large import bills on rice? Why should be allow Bernas to own a monopoly over rice imports causing market distortions? The minister has announced plans to develop the agriculture sector so that we can increase food production and so forth. That will take a few years down the road so that the immediate and effective way to sort out food import bills is to remove any form of monopolies. 

I read one commentator( from Khazanah I think) said- There is a discernible shift towards bite-sized, direct transfers that have a broad reach and direct impact on people’s lives and private consumption numbers. There you are- enhancing private consumption. That’s not transformative all. The excess liquidity is going to be mopped up by private consumption. 

I find it rather strange the same commentator saying that the budget exhibited fiscal discipline and it was a very efficient budget that manages immediate needs in an uncertain environment.  Is this the state of denial Dr Mahathir spoke about?

In relation to that- i.e. exercising fiscal discipline, just how do we reconcile this statement with the plan for more mega projects such as the Coastal Highway JB-Nusa and the Taiping Heritage Tourism Project at a cost of RM978 million. Can we see fiscal discipline being exercised there or can we expect these to go into cost over-runs, be subject to closed tenders and cronyism. Certainly not transformative. .