Category: Budget Debate

2015 Budget (5) – A Critique
by Economic Observer
19th October 2014

In his speech, the Prime Minister studiously avoided any reference to the size of the public debt which now requires an allocation of RM 23.2 billion or almost 11 percent of the Budget to service the accumulated debt of the Federal Government now estimated to amount to RM 568.9 billion accounting for 52.8 percent of GDP, a level marginally below the established ceiling.

These numbers exclude the contingent liabilities of the Federal Government and other off budget borrowings.

Nor did the Prime Minister mention the level of debt carried by households, now in excess of 85 percent of GDP.

What is wholly inexcusable is the failure on his part to refer to the bombshell dropped in the Treasury’s Economic Report concerning the size of the nation’s external debt.

The Economic Report discloses that Malaysia’s external debt totals RM 729 billion, equivalent to 67.6 percent of GDP. This compares with a debt level of RM 335.6 billion or 31.1 percent of GDP before the revision.

This more than doubling of the external debt cannot be swept under the carpet. It is shameless in the manner in which the Prime Minister dealt with the issue. Continue reading “2015 Budget (5) -The Debt Bombshell: New Revelations”

2015 Budget (4) – A Critique
by Economic Adviser
18th October 2014

In indicating a further RM 600 million to EKUINAS to enable it to increase Bumiputera corporate equity the Prime Minister observed that the Bumiputera have yet to achieve the 30% target.

He further noted their effective control over corporations is currently only around 10%.

The Prime Minister appears to be playing to the right-wing gallery in his party by making these assertions which are unsubstantiated.
No details have been provided or reference made to any rigorous study.

Even a cursory review shows that GLCs are almost entirely Bumiputera controlled. The GLCs listed on the stock exchange account for almost 30 percent of paid up capital. Continue reading “2015 Budget (4) – The National Agenda: Increasing equity ownership of Bumiputeras”

2015 Budget (3) – A Critique
by Economic Observer
18th October 2014

The Prime Minister has attempted to offer soothing statements concerning the scope and coverage of the GST.

He has listed a whole list of items that will be exempted. While the list may be impressive, the value of the items that will be exempted remains shrouded.

Such claims as “ Of the 944 goods and services in the basket of goods of the CPI, the prices of 532 items or 56% are expected to reduce up to 4.1%.” or “Meanwhile, about 354 goods and services may experience some price increase but less than 5.8%” offer little clarity. No indication is given about the burden to be borne by an average household or the percentage by which the CPI will rise.

The Prime Minister indicated that the GST will yield RM 23.2 billion in gross revenue. However, with the implementation of GST, the Sales and Services Tax (SST), will be abolished resulting in revenue foregone of RM13.8 billion.

He went on to state: “This means that after deducting RM13.8 billion and RM3.8 billion from a revenue of RM23.2 billion, the Government will have a balance of RM5.6 billion.”

He went on to claim that of the total, RM4.9 billion was being channeled back to the rakyat through assistance programs such as the increase in BR1M.

“Finally, net revenue collection from GST will only amount to RM690 million.” This latter statement is remarkable indeed and is designed to minimize the collection from this new tax.

The Minister has side-stepped pertinent questions concerning the impact of the GST on middle and low income households by referring to the tax reductions. Continue reading “2015 Budget (3) – Implementing GST”

2015 Budget – A Critique (2)
by Economic Observer
17th October 2014

There exists a long held convention for the Annual Budget Speech to serve as a vehicle for reporting to the nation recent economic performance along with a candid account presenting near term prospects.

Sadly the Minister has chosen to ignore tradition.

In a speech of almost 30 pages, hardly a page and a half are devoted to a discussion of recent developments or the prospects for the year ahead. What little is said about recent performance consists of broad generalizations.

Growth merits a few lines; little is said about price developments, private consumption which is a measure of the people’s wellbeing.

Cynically much is made of the performance of the stock market but not a word is said about the growth in private debt or about the leakages that the economy has suffered through massive capital flight.

The reference to investment trends is based on data relating to approvals rather than actual investments. Continue reading “2015 Budget (2) – Economic Performance & Prospects”

2015 Budget – A Critique (1)
by Economic Observer
17th Oct 2014

The Prime Minister-cum-Finance Minister in his opening remarks observed that economic planning and policies of a country need to be adjusted according to developments and challenges in the domestic and external environment.

He went on to add that Malaysia is in need of a move to be an economy based on knowledge, high skills, expertise, creativity and innovation.

A laudable statement indeed which will not be disputed or attract criticism. However, this statement is nothing more than a platitude and rhetorical in scope. It is patently clear what the challenges are.

The nation is grappling with the dangers associated with the continued brain drain, and the continued neglect of the education system. Continue reading “2015 Budget – Policy Challenges and Rhetoric”

by Budget analyst

A careful analysis of the 2014 Budget Speech by the Prime Minister-cum-Finance Minister, Datuk Seri Najib Razak is most revealing and disappointing as there is little by way of an exposition of the challenges the economy faces.

The customary presentation of data on the performance, in the current year and prospects in the year ahead, are matters that are dismissed in a few perfunctory sentences.

The speech gives little information on basic macro-economic assumptions used in basing the revenue and expenditure forecasts that make up the Budget.

The speech gives no hint of how the Government proposes to deal with the less than robust external environment in which the key Malaysian export markets – China, US, the EURO zone – will continue to record sluggish demand.

The price for Malaysian oil and gas are likely to be weaker because of increasing supply from US shale oil and the re-entry of Iranian oil into global markets. With greater supply and lower demand, prices are likely to be lower. Malaysian oil and gas exports will undoubtedly feel the impact. Continue reading “A critique of the 2014 Budget Speech”

Beberapa jam sebelum Perdana Menteri merangkap Menteri Kewangan Datuk Seri Najib Razak membentangkan Belanjawan 2014 di Parlimen dan mengumumkan pelaksanaan Cukai Barangan dan Perkhidmatan sebanyak 6% bermula April 2015, Mahkamah Tinggi Kuala Lumpur membebaskan bekas Presiden MCA dan Menteri Pengangkutan Tun Dr. Ling Liong Sik daripada tuduhan menipu kerajaan dalam skandal Zon Bebas Pelabuhan Klang (PKFZ) yang melibatkan berbilion-bilion ringgit.

Keputusan Mahkamah Tinggi Kuala Lumpur itu membawa dua mesej yang memberi kesan langsung terhadap Belanjawan 2014, Rancangan Transformasi Nasional Najib dan arah tuju negara dan ekonomi Malaysia di masa depan, iaitu:

• Malaysia terus menjadi negara yang “mempunyai jenayah besar, tetapi tiada penjenayah”, di mana rakyat Malaysia menjadi mangsa korupsi dan skandal raksasa dalam keadaan kerajaan dan agensi pencegahan rasuah, iaitu Suruhanjaya Pencegahan Rasuah Malaysia, tidak mampu berbuat apa-apa untuk memerangi korupsi yang melibatkan “jerung” dan bukan hanya “ikan bilis”; dan

• Menteri kabinet kini kebal daripada hukuman jika mereka cuai dalam menjalankan tugas rasmi, termasuk tugasan di peringkat kabinet.

Continue reading “Dua mesej Belanjawan 2014 – Malaysia terus menjadi negara yang “mempunyai jenayah besar, tetapi tiada penjenayah” dan para menteri pula kebal daripada tindakan undang-undang walaupun cuai dalam tugas”

– Sakmongkol AK47
The Malaysian Insider
October 27, 2013

MPs were supplied with voluminous documents relating to the state of the economy. We were ploughing through the documents to analyse the management of the economy while Najib drone on waxing lyrical, poetic and at times, waxing sarcastic over his thematic budget. 2014 has another theme. The theme of the 2014 budget is ‘Strengthening economic resilience, accelerating transformation and fulfilling promises’. If that makes him happy, so be it. Giving an artful theme to the budget does not make it a better budget. The devil is in the details.

But where is the promise of giving RM1200 BR1M which he sold the voting public in last May’s elections? Where is the promise to narrow the gap between the rich and the poor?

Najib has reneged on this promise and stated poker-faced about paying out reduced BR1Ms. The scaled down BR1M hand-outs are downsized by the financial capacity of the government. Finally the chickens come home to roost. He has to face reality something the opposition MPs have warned continuously- that out of control spending is bad for the economy.

Public debt is now more than the 55% legislated debt ceiling simply because this government hides the real debt by various tricks. Eventually the weight of public debt will come down crushing. In 2013 alone, the deficit incurred by some GLCs amounted to RM93billion. When opposition MPs say this budget is for the rich, it wasn’t said out of spite. In 2013, the BR1M given to poor people amounted to RM7 billion.

Compare this to the freedom given to some GLCs to overspend by RM93 billion. The people who should be grateful are not the ordinary rakyat but the BN politicians and their corporate conspirators for being able to hide from the rakyat the magnitude of their extravagance. They should be grateful the public hasn’t turned on them yet. Maybe we should do a Louis and Marie Antoinette on them and that is not even Islamic law.

In the coming days, we will dissect his budget. Apart from minor jeering, we did not steal the Finance Minister’s thunder. We jeered only when he made political capital of certain portions of his presentation. Continue reading “Improving budget management: Our obssession with the 55% debt ceiling”

A few hours before the Prime Minister cum Finance Minister Datuk Seri Najib Razak presented his 2014 Budget in Parliament announcing the regressive and controversial 6% Goods and Services Tax (GST) from April 2015, the Kuala Lumpur High Court acquitted and discharged former MCA President and Transport Minister Tun Dr. Ling Liong Sik for cheating the government over the multi-billion ringgit Port Klang Free Zone (PKFZ) project scandal.

Without going into the details of the case against Liong Sik, the Kuala Lumpur High Court decision carries two messages which have a direct bearing on the 2014 Budget, Najib’s National Transformation Plan and the future direction of the Malaysian nation and economy, viz:

• Malaysia continues to be a land of “heinous crimes without criminals”, with Malaysians victimized by mega corruption and scandals which neither the government nor the anti-corruption agency, the Malaysian Anti-Corruption Commission (MACC), could do anything to combat when confronted with “grand corruption” involving “big sharks” instead of “ikan bilis” in the Malaysian corruption waters; and

• Cabinet Ministers are now given a blank cheque to enjoy immunity and impunity for whatever dereliction of duties in the course of official duties, including up to Cabinet level.

Continue reading “Duo message of 2014 Budget – Malaysia continues to be land of “heinous crime without criminals” and Ministers enjoy immunity and impunity for Ministerial dereliction of duties”

Bridget Welsh
Malaysiakini
Oct 25, 2013

COMMENT Malaysia’s Budget 2014 represents the most important economic policy initiative of Najib Razak’s premiership. After scraping through GE13 and deal-making his way to an unchallenged presidency of Umno, there are no immediate political obstacles undermining his ability to implement the economic reforms he has repeatedly promised investors and international financial institutions such as the International Monetary Fund.

Najib has gone on record to claim that he will reduce government debt, tighten spending and make the Malaysian economy more competitive. International watchers were initially bought over by all the different acronyms coined by the government, such as the ETP (Economic Transformation Programme).

However, they have become increasingly negative with regard to Najib’s financial management which continued to involve massive overspending and this led to a negative rating by Fitch in July this year. With debt reaching 54 percent of gross domestic product, near the 55 percent government self-imposed limit, Malaysia stands on the precipice of future downgrades.

As the Budget debate begins, it is important to highlight some of the key issues and patterns that have characterised Najib’s tenure as prime minister. Continue reading “Najib’s Budget 2014 acid test”

– Liew Chin Tong
MP for Kluang
The Malaysian Insider
October 25, 2013

The proposed goods and services tax (GST) will tax those who can’t afford to be taxed, i.e. 60% of Malaysians who are eligible for BR1M. These are the people who will soon be taxed by the regressive tax, together with the rest of us who live and stay in this country.

I would like to drop the Orwellian double speak so prevalently employed by many GST apologists who are trying to mask the real issue. I will share my views plainly here.

Flawed arguments

Some argue that the government has to be cruel to be kind. Hence, BN would have us believe that the fuel hike subsidy rationalisation is needed to balance the government’s expenditure and ensure its good financial standing.

In theory, this sounds legit. However, look closer and you will find many flaws in the argument. For one, this argument does not take into account the adverse effects on the man on the street. It also demonstrates an incomplete understanding of how the economy grows or declines.

What is the real reason for the Barisan Nasional government to implement the GST? This tax has hung like a sword of Damocles over our heads since Tun Abdullah Ahmad Badawi’s era in 2005. Continue reading “GST: killing the golden goose”

by Tony Pua
MP for PJ Utara
Malaysiakini
Oct 25, 2013

MP SPEAKS Stripping the 2014 Budget of its cosmetic makeup, taking away the glossy distractions and analysing the bare bones will provide an extremely clear indication that nothing much will change in Najib Abdul Razak’s second term as prime minister and finance minister .

The Economic Report 2013/14 gave the good news that the expected revenue collection for the current year 2013 is RM224.1 billion, or RM14.4 billion higher than the original budget projection of RM208.7 billion.

By right, the RM14.4 billion increase in revenue should have resulted in a lowered projected budget deficit of four percent to a market-euphoric 2.6 percent. The budget deficit for 2013 should have shrunk from RM39.9 billion to only RM25.6 billion.

However, it didn’t. Despite collecting the significantly higher-than-expected revenue, the deficit for 2013 remained at RM39.3 billion. It means that almost every single sen of extra revenue collected by the government is immediately expended, instead of contributing towards reducing our debt.

What is interesting when you comb through the expenditure figures is that despite the increase in revenue, the actual development expenditure of the government was RM2.7 billion lower than the budgeted RM47.8 billion.

The development expenditure has the larger economic multiplier effect because it represents investments by the government for future higher returns. Development expenditure includes building schools, hospitals and other public infrastructures.

The lower-than-budgeted development expenditure, the higher than expected government revenue means that the government’s operating expenditure exceeded the budget massively. The government overspent in operating expenditure by RM14.3 billion more the original budget of RM201.9 billion. Continue reading “No goodies, but gov’t splurges will continue”

G Vinod | October 21, 2013
Free Malaysia Today

Pakatan Rakyat will only reveal details of its alternative budget later on fear that their ideas will be copied by Barisan Nasional

KUALA LUMPUR: A parliamentary select committee will scrutinise the Defence Ministry procurement to curb graft, said Opposition leader Anwar Ibrahim in announcing the Pakatan Rakyat alternative budget 2014 today.

“We will also look into postponing the National Service programme for next year until a review is done by a select committee.

“The programme costs us RM800 million annually. On top of that, 22 trainees have died undergoing the programme and we have cases of female trainees giving birth during their three-month stint,” Anwar said at a press conference at the Parliament lobby.

Also present were DAP secretary-general Lim Guan Eng, PAS’ Kamaruddin Jaafar and several Pakatan parliamentarians. Continue reading “Defence budget to come under Pakatan scrutiny”

– Muhammad Nazreen
The Malaysian Insider
October 20, 2013

In the next few weeks, everybody is anticipating the key issues that may be highlighted in the 2014 budget. Malaysia’s mounting public debt is at an alarming rate. Recurring deficits over years due to government’s overspending would be a primary reason why is this year’s budget would be less populist. The BN government managed to secure its win during the 13th general election. So, we could expect less windfall subsidies and pay-offs to be distributed. However, the deteriorating condition of Malaysia’s economy might prompt the fact that it is timely for the government to introduce stern fiscal consolidation. Austerity measures are likely the main ingredients of the upcoming budget.

Here are some of the concerns. Continue reading “Why this year’s budget would be less interesting”

By Teh Chi-Chang, CFA
Executive Director
REFSA (Research for Social Advancement)
Friday, 12 October 2012

We write to rebut Dr Lim Teck Ghee’s assertion that “There is little empirical research to back up what has become an increasingly popular line of argument” that blanket subsidies such as for cheap petrol and sugar “benefit upper-class Malaysians who consume much more than their poorer cousins[1]”.

These are the basic facts:

1. The federal government subsidy bill is expected to exceed RM42 billion this year.

2. If we can agree that subsidies should go only to the poor, and we define the poor as the bottom 1/3rd of households, there will be 2.3 million households or nearly 10 million Malaysians[2] who will get subsidies.

3. RM42 billion is enough to give these bottom 1/3rd of households RM1,650 per month – which will more than double their current incomes of RM1,500 per month!

Continue reading “Budget 2013: Federal government subsidies go up in flames while poor Malaysians watch”

— Foong Li Mei
The Malaysian Insider
Oct 07, 2012

Oct 7 — Tired of politicians’ mudslinging and dirty tricks? We are, too. Thankfully, the panelists at REFSA’s recent forum showed that our country still has political leaders who rise above the muck to focus on working for the best interest of Malaysia.

Her crisp and confident voice swept through the packed hall with grace and conviction. It was nothing like the ferocity fired from the top of the lungs that one has come to expect whenever a political figure is handed a microphone.

She emphasised that politicians should not be given full control of the country’s finances. She spoke of the need for an independent authority to release a pre-Budget report that serves as a reference point for the actual Budget, much like the Office of Budget Responsibility (OBR) in the UK.

She urged Malaysians to remain vigilant over government spending, and insist on having a say in how tax monies are spent. Continue reading “Voices of reason”

[contd from The 2013 Budget: Najib’s Last Hurrah? (1)]

Taken as a whole, Malaysia appears to have accumulated debt rapidly even as it loses competitiveness and is thus precariously placed. The Budget Speech made no reference to these issues despite the urgency and importance of these facts to the economic health of the country.

A full and transparent accounting is imperative to permit the development of strategies to avoid a debt crisis of the type affecting many of the countries, large and small, in the EUROZONE.

Current Economic Developments and Prospects

The preliminary estimates of growth cited in the Prime Minister’s Budget Speech for the first half of 2012 are somewhat exaggerated and contradicted by recent economic indicators. Inflation has been under estimated and thus there is an illusion of a high rate of GDP growth in the first half of the year. What growth occurred can be largely attributed to expanded exports of oil and gas and an expansionary fiscal policy adopted in the Budget for 2012.

There are recent indications of a slowdown in exports resulting partly from weaknesses in global commodity markets; industrial output has also shown weaknesses. Growth in the second half of the year is likely to fall short of growth in the first half. Thus, the projected rate of growth of between 4.5 and 5.0 percent for the current year as a whole is unlikely to be achieved. A lower growth rate has implications for revenues; lower tax receipts will mean a higher deficit further compounded by rising public expenditures. Thus, the overall deficit for 2012 is almost certainly going to exceed the projected figure of 4.5 percent cited by the Prime Minister.

The claim that there was “robust private sector investment” is not supported. If anything, private sector players e.g. IPPs such as YTL, Genting Power etc., have divested. Continue reading “The 2013 Budget: Najib’s Last Hurrah? (2)”

PM Najib prides himself as the ‘Father of Transformation’ or ‘Bapa Transformasi’ because of the spate of transformation initiatives which he has launched since taking over as Prime Minister in 2009.

He has certainly transformed the Malaysian lexicon by introducing an alphabet soup of acronyms such as the ETP, GTP, NKRA, NKEA, SRI, NEM, BR1M and KR1M, just to name a few.

The expensive consultants who conceived of these terms have certainly benefitted from these transformation initiatives. But the positive impact on the man on the street is far less apparent.

While the Prime Minister still sounds positive about his transformation initiatives, his budget tells us a different story. Continue reading “Najib as “Father of Transformation’?”

After the presentation of the 2013 Budget by the Prime Minister cum Finance Minister, Datuk Seri Najib Razak in Parliament last Friday, the Deputy Prime Minister, Tan Sri Muhyiddin Yassin praised the 2013 budget as “the best to date”, and such superlative praises have been taken up by the other Barisan Nasional leaders.

Muhyiddin also denied that the 2013 Budget is an “election budget”. No MP whether from Barisan Nasional or Pakatan Rakyat would agree with him. In fact, I don’t think Muhyiddin himself believes his own denial.

But whether the 2013 Budget will be remembered by Umno/BN leaders as “the best budget” in the past 55 years will depend on whether it is the “silver bullet” for Najib to win the 13th General Election with a two-thirds parliamentary majority or whether it would result in his becoming the last UMNO Prime Minister or a prelude for him to be toppled as UMNO President and Prime Minister in a repeat scenario like what happened to Tun Abdullah in 2009 – becoming the latest “trophy” of Tun Mahathir who would have the scalps of three DPMs and two PMs in the bag!

It is precisely because Najib has no confidence that the 2012 Budget, despite giving goodies for almost every sector of the electorate, would be the “silver bullet” that he has kept postponing the dissolution of Parliament and acquired the dubious record of being the Prime Minister without an elected mandate of his own for the longest period when compared to all the previous four Prime Ministers after Tunku Abdul Rahman, including his father Tun Razak, Tun Hussein Onn, Tun Mahathir and Tun Abdullah. Continue reading “Is the 2013 Budget Najib’s “silver bullet” to win the 13th GE?”

On the occasion of the 49th Malaysia Day, Catholic Bishop Datuk Cornelius Piong in his message questioned if a 49-year-old agreement symbolised by the Keningau Batu Sumpah to uphold religious freedom and other native rights and customs had been kept.

Piong said that 49 years ago leaders from the federation of Malaya promised the people of Sabah they would progress together and have their basic human rights protected, as part of a campaign to convince them to join forces and form Malaysia, with partner states Sarawak and Singapore.

The three key pledges Piong highlighted were guarantees that Sabahans would have freedom of religion, their native land would be safeguarded by the state government and the federal government would respect and protect Sabah local customs.

“Are these promises still being respected and honoured?” Piong asked in his Malaysia Day message.

He said: “The agreement was carved on an oath stone (Batu Sumpah Peringatan) which is still visible read and remembered.” Continue reading “Call on all MPs, BN or PR, in Sabah, Sarawak or Peninsular Malaysia to support a RCI to assess whether dreams and aspirations of Sabahans and Sarawakians in forming Malaysia had been fulfilled or betrayed in past five decades”