A philosophical comparison of the budgets

By Zairil Khir Johari | October 11, 2011
The Malaysian Insider

OCT 11 — And so it has come to this. The last push. With the general election expected soon, both Pakatan Rakyat and Barisan Nasional are preparing themselves for the final assault. Barricades have been erected, cannons lined up and guns trained on the other side. In the last week, we have witnessed the opening salvos launched by both sides.

First to the tilt was Pakatan Rakyat with a modest offering encapsulated in the title “kesejahteraan untuk semua” or “prosperity for all’. And just as it was about to gain traction the ruling Barisan Nasional descended with a no-holds-barred mega welfare budget, coincidentally called “bajet membela rakyat, mensejahtera negara”, or “defending the people and prosperity for the country”.

Without a doubt, both sides have angled the budget with an election in mind. Thus, there is no escaping the menial comparisons between the two sets of proffered “goodies” — RM500 for lower-income households compared to RM1,000 for lower-income housewives, or cash and book voucher bonuses for students compared to RM700 childcare allowances, or a restructuring of teachers’ salary schemes compared to an outright increase in teachers’ allowances. In short, most comparative discourse has been about whose sack contains bigger and better presents — Santa Najib or Santa.

On the surface, both appear to be quite similar in intent and target, namely, to help alleviate the rising cost of living particularly amongst the lower-income groups. Yet the philosophical formulation of the two documents cannot be more divergent. Breaking through the sheath of populist pronouncements, one would discover a sharp contrast between the underlying ideologies that define the two budgets.

Take the position on expenditures. Again, both appear similar on paper — BN’s RM232 billion compared to PR’s RM220 billion, with BN curtailing the long-running national deficit to 4.7 per cent of GDP compared to 4.4 per cent for PR, though the latter is based on a more conservative GDP projection. However, closer inspection would reveal that the essence of PR’s spending policy is necessarily tempered by a commitment to prudence, efficiency and sustainability.

For example, the PR document promises to issue Approved Permits (APs) at market value, thus raising RM1.2 billion in what can only be described as lost revenue. In addition, an open tender system as well as an Unfair Public Contracts Act is promised in order to increase value-for-money and to ensure public interest is protected. More importantly, there is also a commitment to reducing the Petronas dividend to 40 per cent of projected net profits, thus ensuring our national cash cow is able to plough its profits back for reinvestment.

The BN’s spending approach, on the other hand, is really just about spending. In this case, reducing the deficit merely means spending controls and reallocation of resources without necessarily addressing wastefulness, inefficiency and the need for sustainable economics.

Another key difference is the discretionary budget of the Prime Minister’s Department (PMD). The BN’s budget has carved out RM13.5 billion for the prime minister’s use, while PR has pledged to reduce that amount by a third, returning it to the levels of half a decade ago.

Reducing the prime minister’s spending is only half the story — the true intention of this exercise is to take steps towards decentralisation of power. Over the last few years, multiple new agencies have been created and parked under the blossoming aegis of the PMD. This has not only served to consolidate power under the prime minister, it has also emasculated various ministries which have seen their functions replicated and usurped.

Seen in this context, PR’s reduction of PMD expenditure is therefore not only an attempt to return power to its rightful ministries, but more importantly to reduce the arbitrary power of the prime minister. Following this, a promise was also made by the opposition leader, coincidentally also the last finance minister to table a surplus budget nearly 15 years ago, that a PR prime minister would not concurrently sign the treasury cheques — another clear commitment to devolvement and decentralisation of power.

Both budgets also apparently target a very specific group — households with cumulative incomes of below RM3,000 — representing nearly 60 per cent of our population. To assist this group, BN is doling out cash bonuses of RM500 for each family, RM100 for schoolchildren and RM200 for tertiary students as a means of riding out the expected economic storm.

The PR budget, while also promising assistance in the form of a RM1,000 homemaker allowance and a RM1,000 bonus for the elderly, will also grant childcare allowances of RM700 a year in addition to the facilitation and establishment of certified childcare centres. This incentive is designed to encourage female participation in the workforce, thus increasing productivity and income of the targeted households.

In a more direct attempt to address the needs of the downtrodden, the PR budget also crucially commits to a minimum wage of RM1,100, in an attempt to reduce the reliance on cheap unskilled foreign labour as well as to ensure a humane floor wage for entry-level workers.

There are more examples. BN’s approach to education is to build more facilities and renovate school buildings while PR talks about addressing the shortage of qualified teachers. For taxi drivers, BN seeks to lessen their burden with tax exemptions and incentives for vehicular upgrade while the PR budget promises direct permits to individual drivers, thus emancipating them from a monopolistic industry.

As for the sensitive issue of subsidies, BN’s answer is a blind increase while PR pledges to maintain current levels of assistance on the one hand, while also breaking disadvantageous and market-distorting monopolies (like the Bernas stranglehold on rice imports) on the other.

Observing closely, one would find that the fundamental difference between the two budgets lies in their philosophical bases. The BN’s instant remedy to economic malaise is to plaster the wounds with superficial cash assistance. On the flip side, the PR document is clearly informed by an ideological — or perhaps idealistic — commitment to citizen empowerment, increasing productivity and building sustainability.

And so not only is the BN’s social welfare programme an ad hoc and ill-advised response to PR’s alternative budget, it also appears to be a convenient façade to mask the huge infrastructural commitments that have escaped the public’s attention, from hospitals to schools to army camps (read: projects for the boys).

In the other words, while the BN government’s 2012 Budget may appear to be couched in the language of welfare, its ideological bearing appears to be pointing to business as usual — lubrication for the Umno machinery and cash inducements for the rest of the electorate.