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Sakmongkol ak 47

Sunday, 27 October 2013

Improving Budget Management: Our Obssession with the 55% Debt Ceiling

MPs were supplied with voluminous documents relating to the state of the economy. We were ploughing through the documents to analyse the management of the economy while Najib drone on waxing lyrical, poetic and at times, waxing sarcastic over his thematic budget. 2014 has another theme. The theme of the 2014 budget is “STRENGTHENING ECONOMIC RESILIENCE, ACCELERATING TRANSFORMATION AND FULFILLING PROMISES”. If that makes him happy, so be it.
Giving an artful theme to the budget does not make it a better budget. The devil is in the details.
But where is the promise of giving RM1200 BR1M which he sold the voting public in last May’s elections? Where is the promise to narrow the gap between the rich and the poor?
Najib has reneged on this promise and stated poker-faced about paying out reduced BR1Ms. The scaled down BR1M hand-outs are downsized by the financial capacity of the government. Finally the chickens come home to roost. He has to face reality something the opposition MPs have warned continuously- that out of control spending is bad for the economy.
Public debt is now more than the 55% legislated debt ceiling simply because this government hides the real debt by various tricks. Eventually the weight of public debt will come down crushing. In 2013 alone, the deficit incurred by some GLCs amounted to RM93billion. When opposition MPs say this budget is for the rich, it wasn’t said out of spite. In 2013, the BR1M given to poor people amounted to RM7 billion. Compare this to the freedom given to some GLCs to overspend by RM93 billion. The people who should be grateful are not the ordinary rakyat but the BN politicians and their corporate conspirators for being able to hide from the rakyat the magnitude of their extravagance.  They should be grateful the public hasn’t turned on them yet. Maybe we should do a Louis and Marie Antoinette on them and that is not even Islamic law.
In the coming days, we will dissect his budget. Apart from minor jeering, we did not steal the Finance Minister’s thunder. We jeered only when he made political capital of certain portions of his presentation.
The two most important things about a budget  are to reduce the deficit and cut down public sector debt. Apply some common sense- something the PM and his government has been preaching on. Spend within one’s means. When giving out BR1Ms- what was the pious message that he and his ministers gave? With this RM500, spend thee wisely. So why not as an example, the government applies this advice on themselves first- spend wisely and spend within your means.
How does this government plan to better manage the budget? It is now aiming to reduce fiscal deficit gradually achieving a balance budget by 2020. Well, the Pakatan Budget plans to achieve a surplus budget by 2018. BN is trying to get a balanced budget by 2020.
What is the tactic? The tactic is to ensure public sector debt does not exceed 55% of the legislated debt ceiling. It is lying to us. It has already breached this now. Official federal debt is now RM540-550 billion. If you add the deficit from GLCs which has gone beyond RM100 billion, then you end up probably with 650 billion. We can now safely assume public sector debt has reached 65% of our GDP.
Our economy is debt driven. This government fianc├ęs it Business Plan aka budget by taking on increasingly larger debts. Each year it tops up its spending money with borrowings. 2014, it will top up 35-40 billion to make up for the insufficient revenue.
Imagine this. If the interest charged on public debt is 4%, on a debt of 650 billion, the government is paying RM26 billion a year servicing the debt.
So the government manages its sources of deficit around the magical 55% legislated debt ceiling. It looks at the sources of deficits and chooses the deficit-centres which have the weakest and least retaliatory voice- expenditure on the uncoordinated rakyat. Take away subsidies from them under the grand sounding name of subsidy rationalization. Although many, the voice of the rakyat is uncoordinated and they are not capable of mounting strong focused pressures unlike big businesses such as IPP, big monopolies and centres of crony capitalism. These are untouched.
Take always sugar subsidy and the minister rationalise that as something good for the health, prevent diabetes etc. take way diesel and petrol subsidy- the move is rationalised as preventing unqualified users benefiting from the subsidy. Taking away subsides from the rakyat is easier as they can’t mount a forceful retaliation.
Our energies are dictated by the near mythical figure of 55% debt ceiling and so we take measures to circle around the figure. The government has a trick up its sleeves- it circles around this limit by allowing deficits that don’t appear on the balance sheet and our national accounts- the debt and liabilities incurred and made by GLCs. Some of these GLCs are allowed to issue bonds guaranteed by the government because, they are in fact the government. So as long as the Big Spending government can argue that its spending is not beyond the 55% limit, the economy is sound.
This obsession of managing the debt ceiling is the main cause for the  out of control spending. We don’t control the spending, but focus instead of controlling the debt limit.
To me this isn’t right because it violates the basic principle of sound budgeting- spending within your means. By focussing on managing the debt ceiling, we give excessively large space for discretionary spending and the results are what we got as reported by the Auditor General’s Report.
How to make rectify this kind of spending? By setting rules instead of giving room for discretionary spending. It is because we allow in situ discretion, the little napoleons and stalins exploit their empowerment and did all sorts of funny business. If we retain that kind of spending regime, the 2014 Budget will be riddled with the same misdeeds.
The government does not address this kind of deficit-causing centres. They don’t plug corruption, they don’t plug rent-seeking pricing of government purchases and they don’t control project spending.
So instead of making circles around the 55% debt ceiling, why not we specify our budget as a specific percentage of our GDP and then make sure spending does not go beyond this percentage. How to select which percentage?
Look at our economy for the last 10 years and identify which year our economy performed best. In that year what was the budget? For example during those years when our economy grew on an average of 8%, what was the average budget? 22%? If this was the budget in the best year, use 22% as the limit. Make a rule that our budget from now on shall not be more than 22% of our GDP. Then our budget is not made dependent on a near mythical figure of 55% debt ceiling but is made a function of the GDP. Our energy will then be on the GDP i.e. on the economy as a whole.
Once we set our budget as a rule, we adhere to it. For 2014 for example, our GDP is 1,100 billion. Using 22% as the rule, our budget should be around RM220 billion. As our GDP grows, the budget grows too in line with the overall economy.  Our focus isn’t about ensuring federal debt level will remain low and not exceed 55% of GDP.


bruno 27 October 2013 at 10:29  

Corruption is the main core of Malaysia's and all Malaysians problems.With it come higher taxes for the hardworking rakyat.For what?To subsidized the politically corrupted and their cronies.

If not for the hundreds of billions or trillions siphoned out of the country,the gomen do not have to borrow so heavily.All these issues of selling gomen bonds comes with a price too,you know.No grandpa is going to lend you money interest free,unless one suck their dicks.What the rakyat choose they got.A very useless and corrupted gomen.

bruno 27 October 2013 at 10:43  

Now that the GE13 is over and done,it is time for the PR to ponder what went wrong in order to give Umno/BN the stick in GE14.Every Tom,Dick and his dog knows that the BN has squandered the nation's coffers and it is pokkai.If not pokkai then why borrow so heavily.And every one knows that these people who walks the corridors of power,have mistresses so very young,in fact so very very young to be their grand daughters.

And these corrupted and horny dogs are favored and voted into power over the PR by the rakyat.Is the rakyat so very smart to know that the Umno/BN is very much better then the PR.Or are the top leaders of the PR so useless that the smart rakyat voted in the devil instead of the angel in disguised.Go figure.

Anonymous,  27 October 2013 at 19:55  

Our country will be damned if nothing is done to stop all these thieves & robbers.

Anonymous,  27 October 2013 at 21:54  

1/ 3

Sorry Yberkhidmat Sak for being out of the box …

According to an old proverb, if you work on the land diligently, you will reap the harvest. As such, agriculture is always included in the annual budget.- Najib

Doubts & Recommendations :
- Agricultural lands are limited / enroached on – address this urgently; both conventional farming and organic farming simultaneously should done in better ways by our rural farmers with weekly assistance from college / university students majoring in related field. Students majoring in multidisplinary studies should come along to expand their positive impact in the communities . An internship of better understanding real life issues, application of knowledge and reinvention of better solutions. Professionals, retirees could also volunteer – cum - leisure ( cycling, jogging, brisk walking, sight - seeing, makan 2, etc ) extending their expertise to farmers in Berinchang, Tanjong Karang, etc. New variety of vegetables, herbs and ulam should be grown and promoted in our restaurants and to the public.

Speed up in selling the vegetables when they are young, 3 – 6 inches in height (oops, m cluless here ) thus reducing the time of exposure to insects. Earning is quickened. And consumers definitely prefer fresh and untainted vegetables. I have eaten dinners with fresh baby lady’s fingers, kailan and sawi. Amazingly unique and tasty !

- Raising cattle : goats, cows, buffaloes (exterminate the condo cow disease and its carriers). Intensifying and intertwining it with growing vegetables – using natural fertilisers - reducing and managing cost of production more efficiently and be environmentally friendly at one go.

- Rearing of fishes, prawns, lobsters, seaweed, etc – both conventional and organic ways done simultaneously. Rearing Caviar big time ( ? ) Only some eat it ( and that is Ok for those who can afford it occassionally ) but only practise sturgeon farming to rare eco- friendly caviar for export - to meet strignent checks on location, how, what are the wages for the workers, etc.

- Inclusiveness of our Bumiputra Orangasli in selling their organic products Directly to us, say in the pasar malam or flea markets should be done swiftly, minus the “ made – up” rigid rules. They must not be denied their rights in earning to be free from poverty and be able to afford decent life’s basic needs.

*Very good friends related, when visiting the continent Down South many times in the course of working abroad, it sure brings great pride and happiness to witness that the Australian government has heard and are responding to the voices of young Aussies rather outstandingly for inclusion of their Orangasli in their communities activities.

- Being responsible and being aware of health, consumer & social responsibilities to Malaysians as well as for export market, farmers and their team should work hard to overcome these issues. In doing so, they will gain the respect from first time customers for long term businesses in a competitive, important small & medium business in the nation.

Anonymous,  27 October 2013 at 22:00  


Focusing ONLY on mega agriculture and farming industries is a great bkunder as the products will not be affordable for our local consumption. So are to rely on importing ? We could expand our market by exporting to other nations beyond the developed countries. With the escalating inflation and the looming 6 percent GST ( NO to it, but exterminate the mismanagement, massive wastage on public funds, cronies & transactions, scrutinize their financial accounts, etc. ) those working with our farmers, they need to create fresh hopes and a hands-on super-efficient management in the said sector for our sustainability, especially the urban- rural fringe populace. The huge damaging discrepancies of focusing only on multinational farming are seen in the developed nations. We learn from their mistakes and make things better for our small time farmers and Malaysians.

Hence reactivate and intensify individual farming as well.
Having had witnessed and heard that some good works have been executed by Pakatan MPs and Aduns for their communities. That’s incredible !

We can all stand shoulder to shoulder with Sak ( it's not easy to maintain a blog )and them by raising issues, flare - ups against the goons on Sak’s blog with tenacity, camaraderie and Cheers !

Glad that some of us here have eagle eyes and razor sharp minds ! It is certainly heartening to see our Chinese community on their own initiative, giving vast support to buying palm oil. The guys and gals from the Radio Station and the Star, etc. did a great job. So UMNO stop creating the DNA nonsense !!!

Hope Dr. Phua will drop by more often here to ensure that none is not adhering to sugar and carboh restrictions or taking it too little while writing.

Anonymous,  27 October 2013 at 23:36  

I have been taking little or moderate sugar since small to protect the teeth. I think carbohydrates break down into
starches and sucrose, lactose and maltose. Will leave it to the good doctors to explain.

But there will be a domino effect for the confectionery factories, the carbonated drinks manufacturers; dreading workers might be out of jobs.

Nestle is a society responsible company – has been providing free milo to school children on Sports Day, Children’s Day, at marathons for decades; alongside other drinks companies. They do not make huge profits annually, do they?

Alternatively, these manufacturers be convinced to begin mass produce low sugar for all their drinks, chocolates, and not exclusively as now. Adding loads of sugar eliminates the need to use maximum pure fruit juices or ingredients e.g. cocoa in the making of chocolate or chocolate ice- cream, etc. Again, if in developed countries, these same factories use low sugar content as it is strictly regulated there so their fruit juice drinks are pure, so can they produce them here.

2. In encouraging the production of low sugar carbonated drinks, the manufacturers could buy limited subsidized sugar, strictly controlled for them, but again knowing our logistics and the people in – change are bound to corruption.

bruno 27 October 2013 at 23:43  

Dato,the 55% debt ceiling is copycat the orang putih style.Or maybe Uncle Sam's unwritten rule to the world that except for the US,other countries that surpassed this 55% debt ceiling is on the path of Greece and the Pigg's countries,the road of no return.

Anonymous,  28 October 2013 at 13:43  

Harris of Exim Bank stated that it does not have specific facilties catered for the benefits of the number of companies. The Star, Starbiz Oct 28, 2013

What is the point of setting up Exim Bank then ? Is it an ad hoc bank since it has no specific intentions in providing the much needed financial assistance and swift open market facilities to SMEs ?

Harris said, “ What we do, however, is work hand in hand with our sister companies like SME Corp and the Multimedia Development Corp to provide benefits like tax exemptions to SMEs. ”

Looks like they in Exim Bank are couch warmers, more interested in drawing fat salaries with perks. Malaysia’s SMEs will not be able to kickstart new businesses or sustain their businesses. No business, no tax and a projected catastrophic deficit of RM 93 billion for the year 2013. The country will slidedown into the same dungeon as North Korea, Indonesia and Mynmar.

Anonymous,  28 October 2013 at 17:09  

salam dato,

it escapes the elites why there should be no GST imposed on lobster but on simple medication, doctor's visit as well as general IT and Telecommunication hardware at 6%.

We all know it is only the elites whom can afford a GST-less lobster purportedly farmed in Sabah.

But pray tell why ordinary kampung and rakyat's medication, IT - computers, tablets, handphones and doctor's medication and visit are now at 6% GST?

With Sabah's skewed cabotage policy; Sabahans will pay more dearly for goods and services additionally at 6%.



nick 30 October 2013 at 10:30  

This budget is EXACTLY what the voters should expect when they AGAIN placed Najib and especially UMNO in the government. The Malays never learn or according to TDM.."Mudah lupa". It was Najib who increased our debt RM200 billion+ within the short period of 4 years and we expect this "boros" and ungrateful person to properly manage our government and our economy?

It simply doesn't make sense! You don't elect someone who is ignorant and worse, proud of his ignorance just because he is born of noble blood, and expect Malaysia to be heading in the right direction! It's common sense not to appoint criminals to be judges and Malaysian did exactly that!

Malaysia is in dire straits and to steer it away from the precipice, we need good and honest people and certainly we will not find any in UMNO much less in BN. Heck, even TR couldn't even move his ass to stand up and stop this runaway train. What's he waiting for? An invitation card and the people grovelling at his feet? He can't even distance himself from UMNO like what TDM did (with ulterior motive to topple AAB) but at least TDM did something, instead of just keeping quiet (even though TR is an elected "Member of Parliament"!

With the way it's going, we would have to wait for the next GE to do something about stopping this runaway train. Let's hope that by then it is not too late or worse we would have become the next Greece. I wouldn't place my hope with TR or any other "white Knight" to save us. We have that responsibility and we can't delegate that responsibility to some hero or "pendekar" or even "the people's prince". It is we who needs to ensure that UMNO will no longer be the next government and the work start now.

Hoping for TR or some kind of "deus ex machina" to save us from ruin is wishful thinking at best or suicidal at worse. We actually have a choice of other political parties to choose from. Granted that those parties are not that great but letting UMNO and najib's clone continue ruling us for another half century is not an option.

Now it truly have come to the point where the question of the day would be "who would you rather save?" It's either Malaysian or UMNO! And surely the answer would be very, very simple!


Anonymous,  30 October 2013 at 18:22  

YB yang mulia dan yang di karunia.
Kapan mangkuk ayung Corridors of Power dan keledai menterinya akan kurangkan penipuan rakyat dan little napolean GLC dan agensi2 kerajaan tak akan sapu duit negara macam duit bapa kepala mereka.

Aku tak boleh tahan nak muntah dengar penjelasan mangkuk mentari-mentari di parlimen.

Saya hairan macam mana Dato YB mulia boleh duduk sampai habis sesi parlimen tanpa muntah. Ka ka ka>

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