November 2, 2011
http://www.themalaysianinsider.com
Malaysia could still face bankruptcy, Idris Jala warns
Datuk Seri Idris Jala said today that Malaysia could still become bankrupt within a decade if it spends borrowed money on operational expenditure such as subsidies instead of investing the cash.
“If our economy grows less than four per cent… and we don’t cut our operating expenditure, if we borrow at 12.5 per cent, if our annual debt rises to 12.5 per cent and our revenue does not grow, then it will happen,” Idris (picture) said today after announcing the latest investment updates for the government’s economic transformation programme (ETP).
The performance management minister triggered alarm bells with his controversial bankruptcy forecast last year.
Malaysia’s national debt rose by 12.3 per cent to over RM407 billion last year, according to the Auditor-General’s latest report released last week.Although the economy grew by 7.2 per cent in 2010, last year’s fiscal deficit maintained public debt at over 50 per cent of GDP for the second year running.
The Auditor-General said in the report that the government owed 53.1 per cent of GDP, slightly down from 53.7 per cent last year.
Economists have also said the country’s economic growth could slow to just 3.6 per cent next year from a projected 4.3 per cent this year due to the increasing risk of a double dip global recession.
Idris said today that Malaysia will not go through a recession but will suffer an economic slowdown as a result of the ongoing financial crisis in Europe spreading.“It’s not as rosy as we would like,” the Sarawakian minister admitted during a public question-and-answer session.
He noted that the GDP this year was only at 4.4 per cent.But he assured Malaysians “our government will not allow that to happen”.
He also said his forecast did not mean Putrajaya should stop borrowing. “We should borrow money provided the money is spent as investment rather than as operating expenditure,” he said.“We must make sure our borrowing is in proportion to investment,” he added.Subsidies are among the government’s biggest operating expenses.
The CEO of the government’s Peformance Management and Delivery Unit (Pemandu) said bankruptcy could be avoided even if the GDP falls below the targeted six per cent a year as long as it can increase its revenue collection.
Idris said that the country’s population has grown to 28 million but highlighted that only one per cent was currently paying income tax.
He said one of the ways to raise revenue was to implement the goods and services tax (GST). He added that the GST would also help make the country globally competitive, noting that 140 other nations have already done so.
“If we do that, it propels competition. Sooner or later, we’ve got to implement GST,” he said. He said the government has proposed the consumption tax but was unable to carry it out due to objections from the opposition Pakatan Rakyat pact.
Business Times – 31 Oct 2011
MALAYSIA INSIGHT
Sinking deeper and deeper
KL must take urgent action to cut alarming – and growing – national debt
By S JAYASANKARAN
KL CORRESPONDENT
MALAYSIA should take heed of the problems – the public anger, the social unrest – posed by the solutions offered to tackle rising sovereign debt in Europe. God forbid that we head that way!
The Auditor-General’s recent report pointed out that Malaysia’s national debt rose 12.3 per cent to over RM407 billion (S$165 billion) in 2010. The amount is equivalent to 53.1 per cent of gross domestic product. It’s the second straight year that the national debt has exceeded 50 per cent.
The figure is a reflection of the spending spree the country went on to mitigate the effects of the 2009 global financial crisis. At its peak that year, the budget deficit rose to 7.6 per cent of GDP, the highest in two decades.
It has since come down to 5.4 per cent of GDP and the government projects that it will decline further to 4.7 per cent of GDP next year. But that may be overly optimistic.
Everyone knows why the debt has piled up: persistently high budget deficits over 14 years. But it is the pace of the rise that’s alarming. Standout statistic: in the space of six years, total federal government debt has actually doubled from 2004. That way lies folly.
Malaysia’s debt position is close to breaching legislative levels set a long time ago by Parliament. According to the Auditor-General’s report, public debt from domestic sources rose RM41.76 billion to RM390.36 billion last year, while loans from foreign sources rose to RM16.75 billion, or up RM2.96 billion.
But the Loan (Local) and Government Investment Act caps the domestic debt ceiling at 55 per cent (of GDP) for the government, while the External Loans Act 1963 limits foreign loan exposure to RM35 billion. According to the report, the domestic debt level at end-2010 stood at 51 per cent of GDP.
The great irony of the situation is that it need not have come to that. The Auditor-General’s report revealed a litany of financial abuse in several government agencies. Leakages and wastage of appalling proportions were laid bare.
Marine binoculars being purchased at 25 times cost? Over RM5 million to buy horses? If all the wastage was cut and proper procedures observed all the way down, one suspects that Malaysia would be a budget-surplus country.
Nor is national debt going to fall any time soon. Next year, it’s estimated that the debt will breach RM455 billion – almost 54 per cent of GDP.
The danger for Kuala Lumpur is another recession stemming from the West’s economic woes. This time it cannot afford to spend its way out of it, like it did in 2009. On top of that, subsidies on fuel and other essentials like cooking oil, milk, rice and sugar remain intractably high at RM32 billion this year.
And the hits just keep on coming. According to the country’s central bank, the national debt as at June 30, 2011 has risen to RM437 billion, with domestic debt amounting to RM421 billion and foreign debt at RM16 billion.
Copyright © 2010 Singapore Press Holdings Ltd.
Din Merican: the Malaysian DJ Blogger 
Idris Jala is right. He is reminding the government of which he is a Minister. We borrow to invest so that we have growth and money to pay interest and repay the loans. If we borrow to consume, then we must have income from other sources to service our debt. That is Finance 101.–Din Merican
Huh?? Idris Jala should just go and sell roti jala. That is roti 101.
The country will go bankrupt.
But not for the reasons Jala has mentioned.
It will bankrupt from the profligacy and greed of our Politicians, Incompetence of our Government administration and the wanton Squandering of public money on projects of dubious or no economic value.
Hmmm. PIGS. Now where have I seen that before?
If we borrow to invest …similar to Sharizat Jalil’s LEMBU NFC…sure path to BANKRUPTCY for the country lah !!!
It’s all about good management isn’t it? The management of PR led states (Penang and Selangor) has shown significant improvements in state debt management with the implementation of prudent and transparent business practises. Apply that at Federal level.
Remove UMNO for all its blood-sucking practises.
Being “Pok-Kai” is never the concern of the apparently well heeled, highly geared, rent-seeking and entitled clowns who are supposedly leaders of our tiny country. Their Kampong economics dictate that to beg, borrow and steal is truly the only way to comfort and self preservation.
The typical Malay feudal ‘businessman’ is a case to point – Kereta/Rumah mewah, from government grants/loans first – then all else will follow naturally. The “Saya-Tahu-Siapa Syndrome.”
Senator Idris Jala is farting in the wind. Although fed-up that his advice and warnings are being disregarded, he’s the only hands-on Manager they’ve got and they ain’t gonna let go of him so easily. Being the son of a Preacher Man, he ought to just pack his bags and vamoose – ‘cuz the more stink he eructates, the more revenge they will exact from him at a later date.
For the economy to mature, subsidies for ‘basic’ necessities should be scaled down and GST implemented at a gradual pace – provided there is concerted action in improving efficiency, combating corruption/cronyism-nepotism and transparency of governmental policies and implementation. Start with open tenders and proper education of the masses.
But surely these ramblings are water flowing under a very broken bridge. What we need is Life. The UMNO Beast lacks the very definition of ‘Life’ – that is, the ability to reproduce and evolve into something more suited for the global environment. They cannot revivify. And i need some more coffee..
Yes CLF, these ramblings are water flowing under a truly broken bridge. If though,the UMNO beast lacks life, then surely it must die,sooner rather than later
“Senator Idris Jala is farting in the wind” CLF
You gotta warn Kathy.
So she could hold her breath.
Problem is Kat, they are dead but they don’t realize it – the putrefaction is being delayed by regular infusions of Hydrogen Sulfide and other poisons that they are also routinely spewing out.
We need youth like you back home, if only for a while – to vacuum the noxious gases and help bury the Bangkai. The energy and idealism of our Diaspora will help revivify the nation.
“Machiavelli’s best-known book, Il Principe, contains a number of maxims concerning politics, but rather than the more traditional subject of a hereditary prince, it concentrates on the possibility of a “new prince”. To retain power, the hereditary prince must carefully maintain the socio-political institutions to which the people are accustomed; whereas a new prince has the more difficult task in ruling, since he must first stabilize his new-found power in order to build an enduring political structure. He believed that social benefits of stability and security could be achieved in the face of moral corruption. Aside from that, Machiavelli believed that public and private morality had to be separate in order to rule.That required the prince being concerned with reputation but also being willing to act immorally. As a political scientist, Machiavelli emphasises the occasional need for the methodical exercise of brute force, deceit, and so on.”
What you ask for, wish for CLF sounds like a story . It has been told over and over. That we fight decay with energy and idealism?
“There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. ”
Niccolo Machiavelli
Idris Jala is right in the banking and financial aspect, but if we follow his advice where is the entrepreneurship it is not right if we just focus only on return of investment. There are other factors involved in achieving a balance account.
Hanif
Kathy,
There are only two constants in this Universe: Energy and Information.
All else is subject to the interplay between these. Good and Evil is but Information. The evolution of anything needs both with the addition of Energy.
Immorality and Evil, is the consequence of decay and devolution into chaos called Entropy. If there is a God, order must prevail for that is the widest definition of Good. Otherwise, the Second Law of Thermodynamics rules unabated and the Universe cannot support sentience. The very fact that you exist and can think of this is a reflection of Order and a System.
Machiavelli underestimates his contemporary’s difference of opinion: “On the Dignity of Man”, Pico d. Mirandola. Man’s majesty and apparent freedom and the search for perpetual felicity (happiness). I suggest you read it, as a counterpoint to your readings of cynical Machiavellian ethics.
There is no such thing as impersonal ‘Evil’. Immorality causes Entropy, because it is a breakdown of Conscience – even in anthropomorphic systems like politics. It can only be supported when Laws are cynically manipulated to oppress, as what is happening here.
It is said that when one lives in a stink-hole, one does not know what it is to breathe fresh air. That is where the Diaspora comes in – resuscitate with fresh air. Panspermia is another concept though..
Yes, i enjoy these articulations, CLF & Kathy…please continue with the elucidations…at least i do get ” educated”, hope the bunch of goons would similarly realise and wake up from their stuper…
Otherwise, kick them in their butt…
CLF, I will read what you have suggested. Even tho I quote Machavielli , just out of a reaction from you,I know in my heart of hearts there is God and thus order will prevail in the finality. All evil will be overcome. However in Malasyia this evil needs to prevail longer as everyone is in a deep stupor and it takes longer for good to overcome and be finally accepted. yes when one lives in a stinkhole too long, one doesnt remember the smell of fresh air. So it is with God and Order. It takes that wee bit of time but it will prevail.
Even tho I quote him, I do feel he is abit to cynical. I though am not. I have learnt that patience is evrything and order will prevail in His time not ours.
Malaysia WILL NEVER GO BANKRUPT, NEVER…
We have Petronas!!!!
Long live Petronas.
Petronas ain’t no compare to PetroBras.
The latter pours in tons of $$ into R&D and their alcohol driven vehicles are the wave of the future – if it breaks down, a couple of deciliters will definitely make anyone feel Cool!
Petronas, otoh is a bailout machine with depleting reserves.
So now our most august 2nd. Finance Minister is fingering with 30-40 bil RM of Trust funds. If you guys/gals have reached a certain age of majority and maturity – best to remove every single sen from EPF, ASM, BSN etc.. Otherwise Pok-Kai++!!
You know, sometimes I think journos ought to take a course in finance and economics (and maybe get better recording devices).
I was actually there two days ago, and the article (just like the rest of the reporting from other papers) is obviously slanted towards the sensational.
I remember Idris Jala starting off his remarks on this issue by emphasising its all based on IF. And repeating that throughout his comments. And the whole thing came about because someone brought up last years brouhaha on the same issue in the Q&A session – it was not part of the presentation.
For anyone who is interested, the government’s operational balance has been in the black for all but three of the last 40 years – 1972, 1986, and 1987.
Another example:
“Idris said that the country’s population has grown to 28 million but highlighted that only one per cent was currently paying income tax.”
He actually said 1 million, not one percent.