Philosophy Politics Economics

Posted by : Unknown | Sabtu, 8 Oktober 2011 | Published in

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Philosophy Politics Economics

Budget 2012: Najib Fails Reform Credentials

Posted: 07 Oct 2011 05:48 PM PDT

Budget 2012 fails to live up to the Prime Minister's reform pledges in NEM, GTP and ETP

The expectations were high for a pre-election budget where Datuk Seri Najib Abdul Razak will stamp his "reformist" credentials. It is for the Prime Minister to put into action the various reform pledges made in his cornerstone policy blueprints – the New Economic Model (NEM), Government Transformation Programme (GTP) and the Economic Transformation Programme (ETP).

However, the announcement of the budget left much to be desired as little has changed beyond tweaking the budget of the previous financial year. Instead what is perhaps the most worrying is that Malaysians are like the proverbial frog in the hot soup – where the frog does not realise the soup is slowly but surely reaching the boiling point.

We may not yet be facing the crisis of Greek proportions, but Budget 2012 is doing very little to avert such eventuality, leaving the Malaysian economy nakedly exposed to the inevitability.

Federal Government Debt

Our Federal Government debt has increased rapidly from RM242 billion in 2004 to RM363 billion in 2009 and RM456 billion in 2011. That represents a marked 88.4% increase in debt over the past 7 years. It is also an increase of 25.6% or nearly RM100 billion over 2 years.

The increase in debt has increased the pressure on reigning in our budget deficit as our annual debt service commitments have increased to RM20.5 billion next year from only half the amount 5 years ago in 2007.

While our federal government debt to GDP ratio is still at a moderate 53.8%, a far cry from Greece's 117%, we are not far from Spain's 64% or Ireland's 67%, both of whom are facing economic turbulence of their own.

Our debt levels will only worsen in the next few years as we embark on record levels of infrastructure spending such as the RM53 billion Klang Valley MRT project which is expected to be funded entirely on debt.

Wages and Pensions

At the same time, our public sector expenditure is increasingly mirroring that of the European countries with ballooning civil service obligations. The budgeted expenditure for wages and pensions for 2012 is a whopping RM64.1 billion, an increase of RM6.2 billion or 10.8% budgeted for 2011. The increase is even more worrying when contrasted against the budgeted RM36.9 billion 2007, a 73.7% increase in just 5 years.

The GTP had promised a more efficient and cost effective government and civil service. What we are seeing from the Budget is only on which is indebting our children, entrenching our structural problems and very weak expenditure controls.

Economic Growth

Despite the Governments efforts in the ETP, our manufacturing and export statistics paint a starkly different picture.

Our export sector grew a miserly 2.7% in 2011 against 13.2% in 2010. However, we should be further alarmed by the fact that the growth was a result of increased contributions from exports of rubber, paper, textiles, clothes and shoes which grew in excess of 15%, and the petroleum products by 9.3%. Our electrical and electronics sector, which constitutes 26.4% of our total exports industry shrunk by 4.9% in 2011.

From the above indicators, there appears to be a shift away from higher value-added export sectors to the primary products industry such as rubber, wood, textiles and crude oil. This is the exact reverse of what we are trying to achieve via the ETP.

Budget deficit

Based on the Economic Report, we are expected to meet our deficit target of 5.4% for this year only because our revenues had grown beyond the expected in the 2010 budget due to very strong commodity prices. The Government has managed to collect RM21.1 billion of extra revenue on top of the originally budget RM165.8 billion. If not for the unexpected increase in government revenue, our budget deficit would have been a shocking 7.9%.

The Government is planning a 4.7% deficit for 2012, a figure which doesn't give hope that the 2.5% deficit target promised by Najib can be met by 2015. Even then, based on poor expenditure controls and the habitual ad hoc expenditure patterns of past BN governments, even meeting the 4.7% target will be a challenge, especially if commodity prices were to fall below expectations next year.

Optimistic projections

Finally, despite having achieved on 4.2% growth in the first half of 2011, and a slowing global economy in the face of another potential economic crisis, the Government has retained its unrealistic growth assumptions of 5.0 to 5.5%. To meet the target, Malaysia's economy will have to grow by at least 5.7% in the 2nd half of the year, which is highly optimistic to say the least.

The Federal Government's unrealistic expectations coupled with a budget which failed to demonstrate substantive reforms and political will for change makes the 2012 budget a highly disappointing and puts in serious doubt our ability to become a high income nation as aspired in Najib's New Economic Model.

IWK Should Be Returned To Local Councils

Posted: 06 Oct 2011 09:38 AM PDT

We welcome the reply by Finance Ministry to my question in parliament today as to whether the Indah Water Konsortium will be privatised to 1MDB together with other private entities such as Puncak Niaga Holdings Bhd.

When asked to confirm if the IWK will be privatised in whatever form to 1MDB, the Deputy Finance Minister, Datuk Donald Lim has responded that it will not. He has further added that IWK will instead be restructured and placed under the Ministry of Energy, Green Technology and Water.

However, we would like to call upon the Government to take a further step of decentralising the IWK sewerage treatment and management business, and returning it to their respective local councils. The IWK was formed in 1994 as part of Dr Mahathir's privatisation initiative and took over all the relevant functions from the local government authorities. To ensure increased effectiveness and greater responsiveness to issues faced by the people, it is crucial that the local councils are empowered to manage its services.

The centralisation of IWK services has resulted in a costly privatisation exercise where the Government was bailed out IWK from its concessionaire with RM192 million in 2000. The exercise has since resulted in further cost to the government amounting to RM1.2 billion to make up IWK's operational deficits since then.

We would warn the Government against reversing the decision to reject 1MDB's privatisation proposal, especially when attempting to privatise to parties which are facing financial difficulties such as Puncak Niaga Holdings Bhd. The latter had recently announced that its shareholder's funds have plunged to RM36 million breaching the Practice Note 17 guidelines of a minimum of RM40 million of Bursa Malaysia before receiving reprieve from Bursa to regularise its position by June 2012.

Should the Government decide at any point of time to revive the privatisation exercise, such exercise must be conducted in an open, competitive and transparent manner to ensure that the interest of the rakyat is prioritised, and the cost to the Government minimised.

MRT: Tunnel Realignment for Luxury Bungalow?

Posted: 05 Oct 2011 10:40 AM PDT

The Land Public Transport Authority (SPAD), Pemandu and Syarikat Prasarana (or its new owner MRT Co.) must answer to the public for the double standards which have been shown in its treatment of a VIP bungalow in Jalan Damansara, off Jalan Duta.

In the original plan, the tunnel was clearly shown to pass through underneath the VIP bungalow, which based on the arguments put forth by SPAD and Pemandu so far, necessitates the acquisition of the land. The original plan is attached in Diagram A. The contract for the tunnel "portal" has already been awarded and works commenced near the site.

Diagram A: Original Alignment

Diagram B: New Alignment

However, for reasons best known to the authorities, the works on the original site has now been stopped, the tunnel portal relocated and a variation order has been issued to the contractor. The last minute tunnel realignment can be seen in the updated plan shown in Diagram B, where the tunnel no longer passes underneath the VIP house.

The costly and last minute change flies in the face of SPAD and Pemandu's arguments that the tunnel route has already been optimised and finalised and is no longer subject to change. The tunnel route, passing through Chinatown and Bukit Bintang has sparked protests from landowners in the areas because of the authorities' intent to acquire all land above the tunnel.

This is despite the fact that we have argued that the Government is able to, under the amended Land Acquisition Act, acquire the underground land without having to affect the land and its use on the surface. Alternatively, the land owners have suggested that the tunnel routes can be realigned to prevent the costly and inconvenient acquisitions. However, the Government has to date, refused acquiesce to the requests from the landowners.

Now with the fact that SPAD did indeed make a realignment concession to "save" a VIP's bungalow house from being affected by the tunnel route, the Government must explain its hypocrisy and double-standards in dealing with the above issues. On the one hand, the Government remains stubborn in refusing to hear out the pleas of the landowners and traders in Jalan Sultan and Bukit Bintang, many of whom have been earning a living there for decades, while on the other hand, the Government goes out of its way to save a luxury bungalow, despite its cost to the taxpayers.

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