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Thread: Economics: Malaysian 2012 Budget

  1. #11
    Join Date
    Oct 2008
    A budget for the polls battle ahead

    Budget 2012 is a bag of goodies. Even the mainstream press is calling it an "election budget". There is no attempt to disguise the "do or die" battle ahead.

    Several columnists have even asked the government to take advantage of the good mood generated by the budget announcement to hold the elections quickly to make the best of things.

    An election budget, like the power to call for an election at the moment most suitable for the government of the day, is an example of the power of incumbency. It gives special advantage to the government to win as many votes as possible.

    A full belly will mean citizens are more likely to close one eye to its short-comings. All the government needs is for citizens who are not inclined to it to not go to the polling booths.

    For those who are about to shout out loud that this is an unfair advantage and therefore morally reprehensible, the answer is do not be naïve.

    If the situation were reversed, the politicians on the other side of the fence would do the same. The point of politics is to come to power and once in power to stay in power forever.

    Political power, the complexities ahead

    The problem is stay in power to do what? As Malaysia becomes wealthier and more educated, the point of politics becomes more complex.

    If in the 1950s, coming to power was coming into one's own, to be independent of colonial rule; "Merdeka" was no longer enough to stay in power in the 1970s as citizens wanted "development".

    That mantra finally expired in the noughties (2000s) with the emergence of urban voters with aspirations beyond having water, electricity and a roof over their heads. There was just so much Suria KLCC can do to win their votes.

    In mature democracies, a change of government is no big deal. It allows the exhausted party to return to the Opposition bench to mull over their ideology and address their shortcomings.

    It also allows those from the Opposition bench to be in the seat of power and learn that with power comes responsibility.

    This has happened in Penang, Kedah and Selangor and the tenor of the Opposition is certainly more measured than before when they had no experience of governing.

    The same cannot be said for the Opposition bench in those states, many of whom are unused to not being in power and a few still delusional enough to behave as though they have not lost power.

    Lessons left to be learnt

    One would like to believe that politicians have finally figured out what happened in the 2008 general election and that moving forward we are heading towards a better Malaysia whichever side wins. The Opposition's case is quite settled.

    Their alternative budget shows that they are able to come up with coherent policies if they come to power. No doubt a bit idealistic but at least it is not one of those budgets cooked up by well-meaning but completely unrealistic products of idealism.

    As for performance, the electorate will have a chance to judge based upon their performance in Penang, Kedah, Selangor and Kelantan.

    The case today is that of the BN government. An election budget is an indicator of whether the government is on the right track, whether it feels the pulse of its citizens.

    But it is very much a double-edged sword, revealing whether the government is only interested in short-term gains.

    Dubbed a transformative budget, there is little doubt that the government is giving most to its vote bank: rural folk, civil servants and pensioners.

    The first group is more dependent on government policy and because of the way parliamentary constituencies are delineated is a major vote bank. With rapid urbanization, one rural vote is worth at least three urban votes. It makes sense to give this group the most of the budget.

    The second group, civil servants, who are supposed to be loyal to the government of the day, used to be another solid vote bank.

    Malaysia has never seen a change of government and after more than five decades, civil servant loyalty is passed down from generation to generation.

    But four states are governed by the Opposition, so it is important that civil servants be kept happy hence the special allocation for them and the retreat from Mahathir-era reforms that attempted to promote based upon performance rather than seniority.

    Yearning for the past factor

    Lastly, pensioners are the best bet not because they are most dependent on government generosity but because they remember a BN government that was stable and powerful.

    Many would be happy to return to those days and will do everything to put aside whatever dissatisfaction they may feel towards the government of the day because of inflation and other life challenging issues.

    What one may ask is really transformative of the budget? Will affirmative action be based upon need rather than ethnicity? This was the New Deal that the MCA promised if voters would return its candidates to power.

    What about the "open tender" process practiced in Opposition-held states like Penang? These states seem to be chugging along fine with development and foreign direct investments flowing in.

    In the case of Penang, bumiputera contractors have come out to defend the state government for its fair distribution of contracts!

    Obviously, the allocations for governmental vote banks is its prerogative and one cannot begrudge fellow Malaysians from this balm that they will soon receive. But a responsible government will use the budget to meet future challenges as assiduously as winning votes.

    For a budget that takes into account a future global recession, minimise budgetary leakages and invests in Malaysia's future competitiveness is winning future vote banks.

    Eight years from today, more than 70 percent of Malaysians will live in urban areas, the current vote bank of the government would become irrelevant.

    More acutely, with rapid technological developments, the gap between urban and rural is fast disappearing. There is little doubt that an opportunity may have been lost to truly transform Malaysia and build up its resilience to face a volatile and more difficult world economy.

    Yes, a few votes may have been won and for a government that feels itself under siege, crucial votes to remain in power. It seems, to remain in power to deal with a yawning deficit and face more challenging times, is a noble intention indeed. Lets hope the government of the day has not forgotten why it wants to remain in power.

    Usually, the Auditor-General's Report will be released together or slightly before the Budget. Why is this not the case this year? The government must know that it is suffering from a trust deficit. It cannot continue to practice the old type of policies associated with the 1950s and 1970s - give them piped water and electricity, throw money at a problem - and hope to win the next general election.

    The Auditor-General's Report will have to be released at some point and all the feel good feelings now will surely dissipate. It seems the lessons of the past remain unheeded. It is not how much money is allocated, it is how it reaches the people.

    NEIL KHOR completed his PhD at Cambridge University and now writes occasionally on matters that he thinks requires better historical treatment. He is quietly optimistic about Malaysia's future.

  2. #12
    Join Date
    Oct 2008
    3 main concerns not addressed by the Budget

    By Aliran, on 11 October 2011

    Dr Jeyakumar Devaraj reacts to a sugary budget that fails to tackle the serious challenges facing the nation.

    Graphic: FMT

    Every year, once the Budget is read by the Finance Minister, the BN sycophants will fall over each other in trying to give a positive spin to it.

    Tomorrow we will see the same tired phrases repeated in the mainstream papers – “a people’s budget”, “a caring budget”, “budget from the heart”, “with goodies for everyone”, and other sugary phrases which are meant to make everyone believe in the benevolence of the BN government.

    Sure there are some points that are positive – the abolishment of all school fees, for example, which though is only about RM200 per student, will give real relief to the 40 per cent of families whose total monthly income is less than RM2300. The allocation of RM100m each for Tamil primary schools, Chinese primary schools and religious schools will be of great help to these partly aided schools. And there are several other examples like these.

    An objective assessment of a national budget, however, has to go deeper than this. You just can’t juxtapose a few goodies for disparate sectors and use that to argue that it is a great budget! A national budget is a blueprint detailing how the government of the day plans to tackle the main economic problems facing the nation.

    So what are the main economic problems facing the nation? I think that there are three main ones:
    1. There is a real possibility of a serious recession in the next 12 months. The sovereign debt crisis in Europe and the USA may precipitate this. How would this affect us, a nation that exports almost 60 per cent of what we produce? How should we prepare ourselves for such an eventuality?
    2. Liberalisation of the economy and the reliance on the free market to supply basic necessities such as health care, water, education and housing have led to financial hardship for the 80 per cent of families earning less than RM5300 per month. How do we address this problem?
    3. The leakages are enormous. Government procurements are at prices that are up to three times their actual market value. The development budget is about RM45bn, and the allocation for supplies and services is another RM30bn. At a conservative guesstimate that half of this money will go into the pocket of cronies through over-priced contracts and quotations, the country will lose RM37.5bn in the course of 2012. (To put this amount in proper perspective, the total budget for the Selangor State Government for 2010 was less than RM1.5bn!)
    Sad to say, none of these crucial issues are addressed in this budget.

    The Government planners seem oblivious to the possibility of a recession. They talk glibly about sound fundamentals, of robust growth in India and China without taking into account that 8 per cent growth in GDP of US$1.5 trillion (India) and US$3.3 trillion (China) is not enough to counter a drop of 4 per cent in the US GDP (US$12 trillion) and the combined GDP of the EU which is of a similar magnitude! And in any case, China’s and India’s growth rates also depends to a certain extent on exports to the US and the EU; so their growth rates will also be brought down by a recession in the West!

    There are several things we can do to cushion the effect of a serious recession. One would be would be to quickly implement the Retrenchment Fund that the MTUC, PSM, Jerit and other labour groups have been asking for. Another would be to put off expensive infrastructure work and keep those funds aside to ensure that the rakyat’s basic needs are met perhaps through the issuing of food stamps if there are people who cannot find re-employment for some months.

    As for the issue of liberalisation, it appears that Najib and his planners have no doubts in their mind, although ordinary people the world over are coming out to protest neoliberal policies. The liberalisation of another 17 service sub-sectors – including private hospitals – was announced in the budget. Now a foreign company can set up a private hospital in Malaysia. The fact that this will accelerate the brain drain and weaken the government sector on which 75 per cent of our population depend seems to have been deemed unimportant by our Finance Minister!

    As plugging leakages, there is nothing but lip service and a whole set of acronyms such as “SRI”, “GTP” and “ETP” among others, which do not seem to have reduced the pilfering of public funds significantly. There do not seem to be any new believable initiatives in the 2012 Budget to stem the haemorrhage of public funds.

    The 2012 Budget fails to address the crucial economic issues facing the nation. This can only mean one thing – those entrusted with the stewardship of this country and its economy, are certainly not up to mark. Its high time they are replaced!

    Dr Jeyakumar Devaraj, an Aliran member, is the MP for Sungai Siput
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  3. #13
    Join Date
    Oct 2008
    Budget 2012: Tale of a bloated bureaucracy and half-truths

    [COLOR=#707070 !important]Joe Fernandez
    | October 15, 2011
    It's old wine in a new bottle and the operating expenditures, at nearly 80%, will gobble up the overwhelming bulk of the national budget
    The Budget 2012 announced by Prime Minister Najib Tun Razak is no different from the one for this year. Development gets comparatively a measly RM50 billion while operating expenditures, at nearly 80%, will gobble up the overwhelming bulk of the national budget.

    Yet few have commented so far on this “Harapkan Pagar, Pagar Makan Padi” budget. Najib trumpeted that the budget was the collective effort of many brilliant minds, including PhDs, diligently at work within the government.

    He pooh-poohed claims by the opposition alliance that it was a copy-cat job based on their own version. The opposition, at the same time, said the budget was unrealistic.Najib rightly gloated over the opposition putting its foot in the mouth.We haven’t heard the last of this.

    Najib, however, couldn’t get the PhDs to explain why the RM50 billion allocated for this year’s development targets is a measly sum by comparison with that allocated for those charged with supervising this so-called development.

    The projects started so far this year face cost-overruns. This has resulted in either the scrapping or carrying forward of a good percentage of the projects planned for 2011. This makes 2012 old wine in a new bottle.

    It has become almost routine for government development projects to finally cost the tax-payers double, triple and even up to 10 times the initially approved allocation. Old habits die hard as evident from the politics of patronage, far from being in its death throes, still taking centre-stage in Umno.

    The proverbial “getting caught with the hand in the cookie jar” syndrome continues unabated as if there will be no tomorrow. How will all this translate into the national debt burden and the value of the currency in the years ahead? It remains to be seen.

    However, if we look around, we don’t have to look too far in the global village ushered in by the digital economy brought about by globalisation and the information and communication technology.

    The continuing tragedy of Greece comes to mind. The Mediterranean nation, run by a bloated bureaucracy as in Malaysia, has become more than insolvent and muddles through from day-to-day largely on international charity.

    The mother of all cover-ups in the Budget 1012 is the increasing toll that the bloated bureaucracy, already 1.3 million strong, is exacting on the nation’s increasingly precarious finances.

    ‘The ight evils bedeviling Malaysia’

    At one time, not so long ago, the government decided that the then one million strong civil service needed to be trimmed and embarked on an aggressive round of corporatisation and privatisations.

    This brought down the number of civil servants to 800,000 but not for long. The figures were soon on the ri se again and surged past 1.2 million with the government not even batting an eyelid. Babudom had won hands down against their political masters.

    Wither all the corporatisation and privatisation exercises! The Babus themselves had dutifully worked on the twin strategies - amidst much breast-beating, wailing, moaning and groaning – at the behest of their political masters.

    It appears that the right hand did not know what the left hand was doing. The latter was getting the government to be even more firmly entrenched in the business of being in business. The former, meanwhile, was getting it out and away on the premise that “the government has no business being in business”.

    Alas the Babus enmeshed in the world of red tape quickly negated whatever benefits the nation could have drawn from corporatisation and privatisation. Now, we no longer hear any talk about corporatisation and privatisation and the need to trim the civil service to a more financially manageable limit.

    Malaysia does not need a civil service which exceeds 500,000, a magical figure based on merit and productivity. Alas, it will not be, given the gutless wonders in public office.

    Patently, the eight evils bedeviling Malaysia’s national budget every year are the permanent dole system that the civil service has since become, the welfare state system enjoyed by a privileged few from womb to tomb, the subsidy syndrome, the dependency syndrome fostered on the rural people by a ruling party eyeing a captive vote bank, the politics of patronage, the Licence Raj, the system of government procurements, tenders, contracts, concessions, licences, quotas and permits, and the underhand practice of padding the electoral rolls in marginal seats – think slush funds – with illegal immigrants.

    It’s unthinkable for Umno in particular to introduce the kind of reforms that will downsize the civil service and free the work force for the private sector. The party isn’t likely to do away either with the other crippling practices that reduced the nation’s economy last year end to one size smaller than that of neighbouring Singapore.

    Some measure of the national budget not telling the whole story in Malaysia can be gleaned from four recent and not so recent developments.

    For one, neighbouring Thailand has announced that the country will introduce a nationwide minimum wage of RM900 per month. Malaysia has yet to do so and is thinking of a much lower figure sector by sector.

    India, in a “take it or leave it” stance, will not allow its nationals to work as domestic help in Malaysia unless they are paid at least RM1,400 per month. That was enough to send many potential Malaysian employers up the wall.

    Adding insult to injury, Cambodia declared last night (Oct 14, 2011) that it will join Indonesia and no longer allow its nationals to work as domestic help in Malaysia.

  4. #14
    Join Date
    Oct 2008

    Being only a retired military officer, I may be blind to the economic facts, but certainly not stupid to swallow a pack of untruths (I do not like to use the word lies).

    Firstly, a bunch of 'one off" handouts that mainly makes the civil servants, soldiers,policemen,pensioners happy.

    Then some populist moves across the board to give everyone hope.

    Now, I wonder and ask some searching questions:

    1. Is there a long term investment beyond 2012 in the budget?

    Nyet,Nadai,Nien,Bo liau,Tadak,Yillai!!!! So, is it wrong for me to assume that the whole idea is to con the people into an election victory and then do the fire fighting/damage control etc. later? How often have you heard recently from govt depts, "Allocation ada, duit belum terima". Here, they were playing a mahjong game, with the skills of a Tai Chi exponent. It gets us by, believe me, but it doesn't solve the problem.

    2. How can Jibby confidently predict a 5 to 6 % GDP growth in 2012 to "afford" the expenditure, when the world is on the brink of an impendingdouble dip recession?

    I would guess that 4 to 4.5% would be more realistic at most.

    Now here lies the biggest failure.

    THERE IS NO CONTINGENCY WHATSOEVER IF THE RECESSION KICKS IN!!!! Remember, failure to plan is planning a failure.

    3. How is the deficit gap going to close?

    There is no clear cut plans onprudent spending against added revenue collection. The Capital Gains Tax increase is a drop in the ocean. More money can be collected from stamp duties due to the volume of transactions anyway. Yes, there is transformation; from one area of unproductiveness to another area of unproductiveness. Budget deficits translate into debts. Debt servicing was RM12.8 billion in 2008. For 2012, it is estimated to be RM20.5 billion - an increase of nearly 60%." Let's do the math-take interest rate at 5%, RM12.8 billion debt service charges in 2008 would make federal government debt at RM256 billion. Now with debt service charges at RM20.5 billion, the federal government's debt is projected at RM410 billion. This is an increase of RM154 billion from 2008 to 2012, an average increase of RM38.5 billion per year. That would now be the nation's annual actual deficit!!!!!

    Yes, I have tears in my eyes too, because my children will have to pay for it.

    4. Where is Jibby going to get the money? Yes, from us, my friends, the long suffering 1.7 million tax payers. The long awaited GST will be shoved in after the election. Mark my words.The EPF (Employees Provident Fund) and other government-linked funds will be asked to do national service by investing in debt papers issued by the government. Again, a case of using the peoples'money to bail out a financially weak government.

    So, in essence I say, look at the forest my dear friends and now tell me how they are ruining my beloved Malaysia. Call me a pessimist, non believer, not a risk taker etc. but I ask- CAN YOU RUN A COUNTRY ON BORROWED TIME?

    The answer is YES! If you are a leader living on borrowed time.

    May God Bless Us All.

  5. #15
    Join Date
    Oct 2008
    World economy: EIU forecast – Downgrading the euro zone and the US

    October 20th 2011 Printer version

    (Forecast closing date: October 14th 2011)

    Global economic conditions have deteriorated. The debt crisis in the euro zone has badly hit European growth prospects, and concerns are mounting about the potential knock-on effect on the US economy. This month the Economist Intelligence Unit has accordingly lowered its forecasts for both the euro zone and the US. We now think that the euro zone will suffer an outright contraction in GDP in 2012, and that US growth will fall below 1.5%.

    World GDP will grow by 3.3% in purchasing-power-parity (PPP) terms in 2012. This would mark a slowdown from expected growth of 3.7% in 2011 and almost 5% the year before that. (In 2010, global growth was boosted by massive policy stimulus, the effects of which have sadly now faded.) We forecast that global growth will pick up to 4% in PPP terms in 2013.

    The existential crisis affecting the European single currency remains at the epicentre of global economic risk. We still think that, on balance, policymakers will do just enough to ensure the euro's survival, but the crisis is taking an increasingly heavy toll on both the financial sector and the real economy. European banks remain under severe pressure because of fears over their exposure to potentially non-performing sovereign debt. Global financial markets are transmitting this uncertainty—along with broader doubts over the viability of the single currency—to the rest of the world.

    All this is eroding consumer and business confidence. It is compounding the effects of other recent shocks to the global economy, which have included the Arab uprisings and the March 2011 tsunami in Japan. The threat of recession in Europe and the US is also being felt in emerging markets, many of which are big exporters to the West. Some emerging markets are concerned enough to be re-evaluating or reversing course on monetary policy, having previously focused on the risks of rising inflation. Because of the deteriorating growth outlook for the euro zone and the US, we have lowered our 2012 GDP forecasts for most emerging markets—including for China, India, Russia and Brazil.

    Is there any good news? Many economic indicators in the US are still positive. US companies still have lots of cash to expand if—and this remains a big "if"—they feel confident enough to do so. The big rise in US productivity in the past two years also suggests that businesses have squeezed all they can out of efficiency gains and will now have to hire and invest in order to grow. The easing of oil prices from their mid-2011 highs should give some support to economic activity, particularly in the US. Interest rates remain at or near record lows in many countries. Nonetheless, the overriding picture is one of economic gloom.

  6. #16
    Join Date
    Oct 2008
    GDP Growth Rate: Last Octoble, our great Finance Minister projected a growth rate of 5 - 6% for 2012 in his budget speech. Today, his lackey in the PM's dept declares that World Bank's projection of 4.6% GDP growth for M'sia is good news - Excuse me. How does a drop of 1% in growth rate become good news?

    These UMNO-clods have been in power for too long. They become stupider by the day!

    World Bank’s projection of 4.6 pct GDP growth for M’sia is good news, says Nor Mohamed

    Posted on April 16, 2012, Monday

    Tan Sri Nor Mohamed Yakcop

    KEPALA BATAS: The World Bank’s projection that Malaysia’s Gross Domestic Product (GDP)will continue to register strong growth in 2012 at about 4.6 per cent is good news for the country.
    The Minister in the Prime Minister’s Department Tan Sri Nor Mohamed Yakcop said this clearly showed the World Bank’s confidence in Malaysia by also stating it was a realistic projection.

    “In Europe the GDP may just be one or two per cent. Even for the United Kingdom it is less than two per cent. Two per cent is also considered high among some countries. Many countries can’t even achieve more than three per cent. This is good news for Malaysia,” he added.

    He was speaking to reporters after officiating the 9th Convocation Ceremony of the Community College for Perlis, Kedah and Penang here yesterday.

    Nor Mohamed, who is also the Member of Parliament for Tasek Gelugor, said even in the context of an uncertain global economy, Malaysia could still attain a GDP projection of 4.6 per cent.

    “Malaysia can achieve a GDP growth of five per cent if all concerned played their part by working harder.

    “By doing so and based on domestic consumption which will be a very significant element
    this year along with high commodity prices, we can be confident of achieving five per cent,” he added. — Bernama

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