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Why the RM8.1 billion difference between Abdullah’s 2008 Budget speech and Treasury 2007/2008 Economic Report?

In his 2008 Budget speech in Parliament last Friday, Prime Minister-cum-Finance Minister Datuk Seri Abdullah Ahmad Badawi announced an appropriation of RM176.9 billion comprising RM128.8 billion for Operating Expenditure and RM48.1 billion for Development Expenditure.

This was backed up by the Ministry of Finance Statement of the 2008 Federal Expenditure Estimates tabled in the House during the budget presentation (Command Paper 12 of 2007).

However, in another Ministry of Finance document, the Economic Report 2007/2008, (Command paper 2 of 2007),which was also tabled in Parliament at the same time, a completely different set of figures was provided.

Chapter 4 of the Economic Report 2007/2008 on “Public Sector Finance”, in its section on “Outlook for 2008”, states: “This Budget will allocate a total of RM168,799 million, an increase of 2.5% over 2007. Of this, RM128,799 million is for operating expenditure and the balance of RM40,000 million for development expenditure”. (p 96)

These different set of figures were backed up the Table 4.1 on “Federal Government Financial Position 2006-2008” (p 77).

How could there be such a huge difference of RM8.1 billion for the 2008 Development Estimates between Abdullah’s budget presentation and Finance Ministry Statement on the one hand and the Finance Ministry’s Economic Report 2007/2008, all presented to Parliament on the same day last Friday? Continue reading “Why the RM8.1 billion difference between Abdullah’s 2008 Budget speech and Treasury 2007/2008 Economic Report?”

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Optimising Human Capital

The economic contribution from natural resources, especially in oil and gas is expected to decline over the next 20 years as our reserves runs dry. As revenue from oil and gas constitutes more than 40% of the overall Government budget, there is a serious challenge in sourcing alternative sources of revenue to sustain Government expenditure at current levels.

The direct source of replacement contribution towards greater economic productivity in the light of the above will be by substantially raising human capital. With the right quality of human capital, many countries around the world which are not as blessed with natural resources have recorded significant growth above and beyond what we have achieved.

In light of the above, the DAP proposes legislating that at least 50% of our windfall revenues from the oil and gas sector shall be allocated to building human capacity, particularly in Education and Training, above and beyond their normal allocation. This will ensure that our windfall revenues will be productively invested in our most important assets, in particular, the young Malaysians.

We will give every child access to a first-rate education. In every school, the focus will now be on quality. More teachers will be deployed to ensure that there will be more time to plan for quality and innovation in teaching. Our schools must encourage creation of new ideas and creative thinking via different types of classrooms, different styles and different methods, but all with a strong emphasis in quality. Continue reading “Optimising Human Capital”

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PM should immediately respond to urgent issues raised in 2008 budget debate like PKFZ scandal and e-kesihatan and not wait until early Nov

I call on the Prime Minister, Datuk Seri Abdullah Ahmad Badawi, who is also the Finance Minister, to respond to urgent issues raised in the first three days of the 2008 Budget and not to delay for some two months until early November — particularly on pressing public interest issues like the RM4.6 billion Port Klang Free Zone bailout scandal and the outcry over the new rip-off of the e-kesihatan monopoly concession awarded to Supremme Systems Sdn. Bhd without tender.

The Dewan Rakyat will adjourn for a 39-day break over the fasting month and Hari Raya holidays, resuming on October 22. This would mean that the 13-day general debate for the 2008 Budget before the ministerial reply would be broken up into two parts, three days this week and 10 days from 22nd October to 6th November, with Ministers beginning their reply on November 7, 2007.

There is something very wrong with the whole notion that issues raised in Parliament during the first three days of the 2008 Budget this week are only answered by Ministers two months later — especially with regard to pressing public interest issues demanding immediate response and action, particularly urgent matters like the RM4.6 billion Port Klang Free Zone (PFKZ) bailout scandal and the outcry over the new rip-off of the e-kesihatan monopoly concession awarded to Supremme Systems Sdn. Bhd without tender.

Accountability, transparency, integrity and good governance principles demand instant end of the government’s denial syndrome both in and outside Parliament about the RM4.6 billion PKFZ bailout scandal — particularly at a time when the Prime Minister and Cabinet Ministers are trying to assure Malaysians that they meant business and would not brook any hanky-panky following the shocking exposes of the pervasive culture of impunity, corruption, waste and mismanagement of public funds in the 2006 Auditor-General’s Report.

Abdullah said in Kuching yesterday that he had directed all Cabinet ministers to go through the Auditor-General’s report in detail and to fully explain anything that is questionable. Continue reading “PM should immediately respond to urgent issues raised in 2008 budget debate like PKFZ scandal and e-kesihatan and not wait until early Nov”

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Reliance on Oil & Gas

Malaysia is a country blessed with abundant natural resources. In particular, we are thankful that the country is rich in oil and gas, which created Malaysia’s sole representative in the Fortune 500, Petroliam Nasional Berhad (Petronas).

In the most recent financial year ending March 2007, Petronas achieved record profits before tax of RM76.3 billion thanks to record high crude oil prices which increased from under US$25 per barrel to above US$70 all within four years.

Of greatest importance, was the fact that Petronas contributed RM53.7 billion to our national coffers in taxes, royalties, dividends and export duties last year.

Contribution from Petronas and other oil and gas companies operating in Malaysia was budgeted to make up some 46.8% of the government revenue for 2007.

This represents a steep increase from approximately 30% in 2006 and 25% in 2004. These statistics marks Malaysia’s heavy reliance on oil and gas industry today.

Malaysia’s abundance of oil & gas resources is akin to striking lottery. It is a once-off affair, and at some point of time, our reserves will run dry.

According to Oil & Gas Journal, Malaysia held proven oil reserves of 3.0 billion barrels as of January 2007, down from a peak of 4.6 billion barrels in 1996. These reserves will last us for only another 20 years or so.

In addition, Malaysia is expected to become a net oil importer by 2010 assuming a conservative growth of 4% in petroleum products consumption. Our trade current account surplus has also been boosted significantly by oil and gas related products which constitutes more than 11% of our exports.

The frightful acceleration of dependence on our limited oil and gas resources places the country’s economy at great risks. Continue reading “Reliance on Oil & Gas”

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Challenges of globalisation

Globalisation brings both new threats and opportunities for the Malaysian economy. Should we rest on our laurels and continue to believe that we can be sheltered by the proverbial coconut shell, it will only result in irreparable damage to the economy. However, if we were to instil in our economy the spirit of resilience as well as the ethics of competition, hard work and innovation, Malaysia will be able to achieve its full potential via the vast opportunities provided by globalisation.

Today, capital, enterprise and talent are flowing to countries where government can be trusted, where the workforce is well-educated and skilled, and where the quality of life is high. These are key pillars of our economy and our country which we must build in order to reap the full benefits of globalisation.

Malaysia used to attract some of the biggest technological giants such as Intel, Motorola and Dell to develop and manufacture their latest technologies in the country. However, in the past decade, we have clearly fallen behind in terms of advancement in manufacturing technology. For example, Malaysia’s current leading semi-conductor wafer-fabricator, SilTerra Malaysia Sdn Bhd offers major foundry compatible CMOS logic, high-voltage and mixed-signal/RF technologies down to 130 nanometer feature size. SilTerra’s wafer fab has a design capacity of 40,000 eight-inch wafers per month.

However, semi-conductor technology has advanced significantly with state-of-the-art 90-nm technology on 300-mm wafers, and 65-nm production. In fact, 45-nm process technology is now under aggressive development. Our neighbours, Singapore, for example, is attracting more of the ‘first-of-its-kind’ investments such as the chip used in the latest PlayStation3 and Xbox. A French semiconductor company, Soitec, is investing $700 million to set up in Singapore its first offshore facility to make the wafer for this chip. It is high precision, high technology. The wafers have alternating layers of silicon and insulator, unlike conventional wafers which use silicon throughout. Singapore became the only country in Asia that it trusts well enough to set up its first manufacturing campus outside of France. Hence, it is key for Malaysia, in the age of globalisation, to bring back global investments in leading age technologies. Continue reading “Challenges of globalisation”

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Economic Prospects — Dangerous Times ahead

The budget offers the rosy view that the Malaysian economy will continue to be resilient, with a projected growth of between six and 6.5 percent in 2008.

The economic prospects need to be placed in perspective. First and foremost, the external economic environment has sharply deteriorated and the international agencies and governments of the developed countries have turned bearish on global economic growth prospects in the wake of the US sub-prime crisis. Some analysts have even gone so far as predicting a recession.

Malaysia, as an open economy, is not immune from these adverse developments. History indicates that a global slowdown impacts on Malaysia in a magnified manner — lower exports linked to weak demand and lower commodity prices; lowered inflows of capital and through multiplier effects contributing to lower domestic economic activity, lower domestic investment, and lower government revenues which in turn force the government to increase borrowing with the inevitable growth in the deficit.

Thus, the over-optimistic assumptions and forecasts lack credibility. The prognosis for 2008 must thus be viewed at best as one of increased uncertainty and heightened risk.

A more realistic assessment would be that Malaysia may face an economic crisis and will need to change course to withstand the looming economic storm. It cannot continue on the present path. It is deeply troubling that the Government does not appear to have recognized the perilous circumstances that are now unfolding. Continue reading “Economic Prospects — Dangerous Times ahead”