September 28, 2012
BUDGET DAY: Reckless Government Spending no longer affordable
by Koh Jun Lin(00-27-12)@www.malaysiakini.com
The country’s growth has been driven by “goodies” and infrastructure projects, both of which are bad news for Malaysians because it increases government debt, said Kuala Selangor MP Dr. Dzulkefly Ahmad.
He said last night that on top of the government debt of RM477 billion (or 53 percent of the gross domestic product, out of the statutory limit of 55 percent), the government has also assumed RM116 billion in liabilities from statutory bodies and government-linked corporations.
This, combined with widening income disparities and over-dependence on oil and gas revenues would not allow for reckless spending, said Dzulkefly, who is also PAS Research Centre Head.
“Even when it is close to the elections, it would not allow them to be recklessly giving goodies and handouts, as free as they would like to. But of course, it goes both ways and Pakatan Rakyat should not also do that,” he said, before detailing the coalition’s alternative budget, which aims to achieve 5.2 percent growth while also slashing the budget deficit by 3.5 percent.
Dzulkefly was speaking as a panellist during a pre-budget forum organised by Parti Sosialis Malaysia (PSM) at the Kuala Lumpur and Selangor Chinese Assembly Hall.
He also told the 50-odd members of the audience that an economic boom-and-bust cycle normally last about ten years, but Malaysia has been having budget deficits for 14 consecutive years, which he described as “strange”.
“We have seen the boom and the bust times, while others – even Indonesia, Thailand and Australia – are having good times and enjoying not just a balanced, but a surplus budget…That tells a lot about how reckless and unscrupulous (we are) in terms of fiscal discipline in the development that we all choose,” he said.
Issues of competitiveness, sustainability and the poor
Earlier in the forum, political scientist Dr. Ong Kian Ming (right) gave the audience a run-down of the statistics to paint a grave picture of the economy.
This included a relatively high income inequalities, “pockets” of poverty especially in rural areas, a drop in the Global Competitiveness Report rankings and the Corruption Index and poor achievements in education.
All these take place while the government debt increases from RM267 billion (47 percent of the GDP) to the current RM477 billion, as well as increasing pollution.
“From these three issue of uplifting the poor, competitiveness and sustainability, they are actually very serious concerns. It has to be addressed not just by the budget, but also by larger government policies,” said the academician, who had recently joined DAP as an election strategist.
Meanwhile, Sungai Siput MP Dr Michael Jeyakumar Devaraj (left) told the audience not to expect a good budget from the government because “the ruling elite in the BN (Barisan National) has not got clue there is a problem,” he said.
He said this could be seen from the government’s talk of liberalisation, privatisation, and lowering corporate taxes to draw investors, and questioned whether such measures are still viable.
The PSM politician said measures to protect workers rather than capitalist, such as a retrenchment fund, are needed instead in order to fuel domestic consumption.
This would in turn encourage investors and entrepreneurs to produce goods and services to meet demand, rather than investing excess funds in financial speculation.
No plans to deal with depletion of oil and gas reserves
The last speaker, Malaysiakini chief executive officer Premesh Chandran, said that Pakatan Rakyat’s policies thus “had done well, but could do better”. Some areas of improvement include coming up with concrete plans for improving public transportation, making the spending of constituency allocations transparent and address healthcare issues, particularly in Pakatan Rakyat-led states.
Premesh also warned that a “perfect storm” is forming, because Malaysia’s population is ageing and does not have the wealth (mainly oil and gas) to support them, and there are no plans to deal with the eventual depletion of oil and gas reserves.
Prior to the start of the forum, a 30-minute candlelight vigil was also held outside the venue in solidarity with Suaram. The human rights NGO is the subject of several ongoing investigations, which it claims to be politically motivated.
Din Merican: the Malaysian DJ Blogger 
This will be an Election Budget. Najib and cohort will be spending as if there were no tomorrow. Remember the story of the Ant and the Grasshopper which you may have learned in school (my generation certainly did). What became of the Grasshopper (not to be confused with political kataks and grasshoppers) when winter came? –Din Merican
Yes, Najib and his cohort will have to spend like no tomorrow, because if BN lose in this election they will really have no tomorrow, as the PR govt will dig out all the dirts accumulated by these priviledge thieves and legal robbers for so many decades. That’s the reason why mahathir is so worried these days, as can be seen from his relentless effort in trying to swing the supports of the voters to BN, or more precisely HIS UMNO BARU.
Any government cannot spend more that what they can collect via taxes on a long term basis. The clear prove is right in front of us, in the financial crisis currently face by the US and the PIIGS countries. They have been living it up by piling up their debt for over 30 years both private and public debt. And this debt have now come due. Politician being politician, they want to get elected every five year without realising that they are doing major harm to the next generation by running such huge debt. The bill will come due some point in the future and guess who will be picking it up. Yep our grandchildren. By than this reckless bunch of politician will be long gone. If we continue with this policy of deficit spending, it will be a question of when not if, we will face a debt crisis in the future. Than our government bond yield reaches 7% and all hell will break loose.
The budget to be presented this afternoon will be the election budget – no doubt about it. Will it work to win more votes? We will see at the GE13.
Our National debt increase from 229b in 2005 to 456 b in 2011.I you included off balansheet and govertment guarantee including to Najib and Rosmah pet co.1 MDB the amount of our debt is 573b.
Like greece and Italy.
Nice of you to remind us of the ant and grasshopper story, Pak Din. It has conveniently left my memory. The poor grasshopper suffered ‘cuz it couldn’t careless to prepare for the coming winter and paid the ultimate price. The parallels are there for all to see. The only ones who don’t see are the morons in Putrajaya. Maybe they pretend not to see. As for Al Kutty he’s a gone case. The mad rush for the exit is already beginning.
I’m jumping the gun a little here, but I think you’ll be surprised at the numbers when they come out. It’s a reasonable budget all things considered.
@Thomas C
Right now, yields on Malaysian government debt are at historical lows. Debt service as a portion of opex is also at a historical low.
@Hamid,
Greece and Italy both have government debt ratios to GDP exceeding 100% even before adding contingenbt liabilities, ours is half that. We are not like them.
Isa has been saying it all along… DEBT IS BAD.
The answer? Balanced budgets.
This is how individuals survive. Countries are no different… no matter what the economists say.
Year after year the budget is in deficit yet Najib says BN is a responsible government. Janji tiap tiap tahun deficit.
If you do not have to pay for it, you spend beyond your means. This is the hallmark of a corrupt and irresponsible government. It is interesting to know the percentage of this excess spending owing to nepotism and corruption. This kind of people should be brought to account one day and do not think that their ill-gotten wealth would not be detected no matter where in planet earth it is stashed away. Justice must be done, you reap what you sow.
“The poor grasshopper suffered ‘cuz it couldn’t careless to prepare for the coming winter and paid the ultimate price.” Tok Cik
So winter has come to Malaysia? First there is the Arab Spring and now Malaysian Winter? Grasshoppers are a good source of protein and are eaten in many countries including the Middle East and China. The way things are going soon you guys will be eating grasshoppers.
Those who believe in splitting the votes this coming elections may want to form the Grasshopper Party. It may not be such a bad idea.
Din, see the faces of the opposition idiot ESPECIALLY Anwar when Najib announce his rakyat budget.
Bravo Najib, PROMISED FULLFILLED.
ilham, it is so unbecoming of calling a fellow Malaysian, a prominent leader in the opposition “idiot”. Dislike him all you want but please refrain from name calling. You’re just lowing yourselves to their level.
We will not be eating grasshoppers but be eaten as grasshoppers.
Badjet 2013? Here’s what my friends think. Sergio copied it from the Beatles 40+ yrs ago. Doesn’t matter whether ilham agrees or not.
‘Buy it, Strip it and Flip it’ is the motto of Grasshopper investment companies, one good example is the US company Kolhberg, Kravis and Roberts. it was known as the mother of all Grasshoppers. they buy into ailing and also healthy companies, run them into debts and sell or auction them off, to the disadvantage of employees.
such vulture firms are waiting for the PIGS to fall.
in the EU big sums of money are moved to help the PIGS but who is going to help Malaysia?
our leaders would be sunbathing in their respective retreats and malaysians would still be fighting for their ketuananships.
for those who don’t know the story Dato’ is referring to:
one classic version
It’s defend on whose giving the opinion and who is talking.
Idham.what is so great about Najib budget.He didnt adress the real issue we have.National debt increase another 10percent.FDI drop,unemployment among the graduate on the rise.He is giving,giving,where the revenue will come.Slight drop in commodity price,we will be in trouble.
The budget is all about giving hand-out of cash and goodies when there is no turn around on the the national policies to improve our economy. By giving out goodies will help out those derserving folks but that is not the answer to their long term issue, Basically, the subject matter at this point is more on voters support where the 13th general election is about to begin.
hishamh
Yes both yield and debt service are low now, but the point is if we are not careful and continue to spend more than we take in, it will not remain low for long. Once upon a time the sovereign bond yield is also low for the PIIGS countries. Look what happen now.
@TChan,
We don’t have a credit-driven housing bubble, our banks are well-capitalised and have learned from the 1997-98 crisis (as have our corporates: corporate leverage has been falling for a decade as well), we don’t have economy-wide defined benefit pensions plans, and we aren’t part of a currency-bloc that deluded investors into thinking that our credit was safer than it really was.
I don’t see the similarities.
The 7% limit that the markets talk about with reference to Spain and Italy is dependent on specific circumstances – for instance, 10yr MGS yielded over 7% for most of the early 1990s, when Malaysia was running a budget surplus.