Day: November 1, 2009

By S.C.

Key Budget Allocations

The budget allocations listed in the budget speech are indeed astonishing and represent a long litany of projects and allocations, the direct beneficiaries of which appear to be special interests and well connected individuals.

This should be no surprise as the budget has become the chosen means to distribute corporate welfare with a few sops for the public at large. One may well ask why billions more are being channelled to infrastructure at a point in time when the economy is in greater need to strengthen institutions, develop human capital and to widen the safety net programmes to protect the weak and the vulnerable elements of our population. Continue reading “2010 Budget: sound and fury without substance (4)”

By S.C.

The Track Record

The Budget for 2010 must be seen against the larger canvass of economic management by the BN Government over the recent past.

It should be recalled that the global Great Recession began in mid 2007 as the sub-prime fiasco in the United States began to unfold. The economic slowdown spread and gained momentum in 2008. As the gathering storm clouds hovered over the horizon, many Governments began to react and take counter recessionary measures.

The Barisan Nasional Government for its part remained in a state of denial. Ministers dismissed with some arrogance the notion that the Malaysian economy would succumb to the global slowdown. They argued rather smugly that Malaysia was immune as it had decoupled from the global economy. Continue reading “2010 Budget: sound and fury without substance (3)”

By S.C.

The Macro-Economic Scene

The key economic indicators and assumptions used in the budget formulation are:

• Malaysia economy to grow 2-3 percent in 2010 after a contraction of 3 to 4 percent in the current year.

• Per capita income to increase by 2.5 percent to RM24, 661. This rate of growth is inconsistent with a GDP growth rate of 2 to 3 percent as population growth is in the region of 2.5 percent; this would yield a per capita growth of close to zero

• Budget 2010 allocations total RM191.5 billion, of which RM138.3 billion is for operating expenditure and RM53.2 billion for development expenditure.

• Federal government revenue in 2010 to decline by 8.4 percent to RM148.8 billion despite the tax changes proposed.

• Budget deficit at 5.6 percent of GDP compared with 7.4 percent in 2009.

• Exports will revive to 3.5 percent growth after having fallen by over 23 percent in the first half of 2009; this assumption is dependent on developments globally;

• Private consumption will grow by 2.9 percent as against 0.5 percent in the current year

• Inflation will remain low

• Unemployment will not exceed 4 percent

• Private investment will grow by 3.4 percent in 2010

Continue reading “2010 Budget: sound and fury without substance (2)”

By S.C.

Introduction

The maiden Budget unveiled by the Prime Minister was anticipated with great expectations of a new direction to move the Malaysian economy on to a new path of growth and revival through the adoption of policy reforms designed to restore competitiveness. These expectations, sadly, were not met.

The 40-odd-page two-hour long Budget speech delivered by the Prime Minister in Parliament was a great disappointment. It contained little by way of a bold policy agenda or a set of much needed measures to begin to restore the Malaysian economy to health.

The speech was long on rhetorical assertions and a litany of expenditure proposals; it contained little in the way of actual innovative thinking despite the Prime Minister’s resolve to adopt a new model for the economy “based on innovation, creativity and value-added activities”.

There were hardly any credible steps outlined as to how the unsustainable record high fiscal deficit of 7.4 percent recorded in 2009 was to be slashed. The broad assertion that the reduction of the deficit to 5.6 percent was to be largely achieved via proposed expenditure cuts in the year ahead. The main spending cuts are to come from reduced “operating expenditure”, lower food and fuel subsidies, and less money for development spending. Yet the expenditure proposals for 2010 allocate 11 per cent more money for the Government wage bill in 2010 for the nearly one million workers on the payroll which account for almost 10 per cent of the work force and constitute a mainstay of the BN government’s support. Continue reading “The 2010 Budget: sound and fury without substance”