Tolls and hikes short-circuiting Malaysian future

S RAMAKRISHNAN | 12:47PM Jan 2, 2014
Malaysiakini

COMMENT The simultaneous increase in fuel and sugar prices, electricity tariff and toll hikes have got Malaysians worried and bewildered as to how they will manage their household expenses. Compounding matters will be the Goods and Services Tax (GST) that will kick in in 2015. The already weakened ringgit and the sudden withdrawal of subsidies on essential goods will hit hard where it hurts most – the pocket.

Not unlike Marie Antoinette, the prime minister is obstinately insisting that the people can afford these massive hikes. Talk about telling the masses to eat cake, he adds insult to injury by saying these increase are not a burden!

The entire cabinet and prime minister suddenly woke up from their slumber. It dawned on them that the budget deficit, huge public and household debt have to be narrowed. What is shocking is that for 16 continuous years, the deficit and the mounting debt did not raise any alarm bells.

In fact the pro-government economists and mainstream media stoically reminded the rakyat that economic fundamentals were positive and our country is on track to become a developed nation by 2020. But all that propaganda did not convince the world. Fitch Rating Agency, in a startling report, downgraded Malaysia from stable to negative. And the game was up.

The media propaganda failed and even more frightening, instead of being developed Malaysia, by 2020, may be a bankrupt nation!

The acrimonious Fitch report had a jolting effect that aroused the Malaysian government from its deep slumber and self-delusion. It suddenly dawned upon the cabinet that the lies they had believed to be the truth, were, in fact, lies.

Shocking tolls tax rakyat to the brim

The 16 consecutive budget deficits and the huge debt suddenly had to be addressed, checked and reversed immediately. To appease the fund managers and rating agencies, the government is hurriedly moving, albeit rather clumsily, to make band-aid changes to gaping wounds. Wounds that needs massive surgery.

In good times when the government privatised essential services like electricity and water supply, highways and telecommunications, to name a few, it was concerned about assuring the service provider’s future profits and not the people’s welfare.

The government created monopolies that were provided with easy loans to be written off later. Umno cronies and new government linked companies were created into being to acquire lucrative under-valued privatised monopolies. And the government was on hand to absorb their losses and ensure future profits.

Toll concessionaires and independent power producers signed shock-proof contracts that not only guarantee future returns, but included provisions to extend and raise duration and tariffs. They are already earning billions if not hundreds of millions and yet the government continues to raise toll rates.

It is said that the cost to maintain road is only about 6 percent of revenue. Such a cash-generating concessionaires do not need any subsidy or toll hike. Yet Plus has the right to collect toll till 2038 with right to hike toll rate every three to five years.

Tenaga Nasional Berhad’s 2012 year-on-year profit is RM4.6 billion and 2011 year-on-year profit is RM4.2 billion. Yet effective Jan 1, 2014, all consumers have to pay higher rates. The 38.53 sen per kWh hike will add RM1 billion ringgit to TNB coffers. Subsidy to consumers of approximately RM5 billion is to be stopped but subsidy to independent power producers (IPPs) of about RM19 billion continues.

Having an over bloated civil service, which constitutes 4.68 percent of the population is rather unimaginable given the massive inefficiencies at all levels. Compare this figure to Indonesia that has only 1.79 percent, Philippines 1.81 percent, South Korea 1.85 percent and Thailand 2.06 percent. If anything, it is a tremendous drain on the budget.

Civil servants’ emoluments will make up RM63.6 billion (30 percent) out of the country’s operating expenditures of RM217.7 billion in 2014. Having such a huge civil service, the Malaysian government still paid RM7.2 billion to private consultants since 2009.

Race to the finish…

Malaysians are carrying the burden of paying for their bloated civil servants’ incompetence, bailing out Umno cronies and funding the rising BN election campaign funds. Winning elections has become very costly for BN. Since Najib Abdul Razak took over as finance minister in 2009, the debt to GDP ratio grew from 38 percent to the present 54 percent.

Is Malaysia racing to become a developed nation or is it heading towards a catastrophically bankrupt nation come 2020? Unfortunately, the rhetoric is about being a developed nation. But the actual statistics tell another tale.

With a huge civil service which is unproductive and high debts resulting in heavy debt servicing costs, the Malaysian government will resort to privatise more essential services without subsidies. And these will add more financial burden on the people. And the vicious cycle becomes even more frequent, and faster, strangling the rakyat further. Indeed, let them eat cake… with less sugar.

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S RAMAKRISHNAN is a former senator.