September 29, 2012
Budget 2013: It is an Election Budget
by Aidila Razak (09-28-2012)@http://www.malaysiakini.com
BUDGET 2013: The array of goodies dished out in Budget 2013 is seen as a clear move of the BN government in reaching out to its vote banks in different sectors in the run-up to the 13th general election.
However, analysts feel that the Najib administration has, yet again, left out the middle class, despite a slight one percent cut in the income tax, which is seen as little relief. Here are some of their observations:
Ibrahim Suffian, Director of Merdeka Centre:
It’s an election budget, mainly due to the sheer size of dash payments to different sections of the population, including the focus on agriculture, where the BN has its support base.
It might make some people unhappy, especially the tax-paying middle class who are not getting much from the budget. The tax reduction does not cover many people, who will continue to pay tax without getting much relief.
However, the government did address key issues such as transportation in major cities. But it’s surprising that Johor Baru was not mentioned for this, given its size. Maybe the BN feels it’s a safe area (in terms of votes) – or it is a strategy to make people vote for them.
No doubt the focus on crime reduction and the expansion of the home owner scheme is a positive development, but it will take time for the policy to have a political impact. It’s also spotty, for there are only a few places earmarked for this programme.
I am also not sure if providing grants to residents’ associations for crime prevention is the way to go. It is admitting that the crime rate is up and the Police are not able to handle it.
Dr (h.c) Ramon Navaratnam, Economist:
The projected growth rate of 4.5 to five percent is too optimistic, given the world economic situation, and so the projection of revenue is also optimistic. I am concerned that the target on deficit and debt cannot be met.
In terms of revenue, there are no new taxes, such as the GST, so there is nothing to raise the tax base. We are also not cutting subsidies, except for sugar, so it is almost like business as usual, with a greater spread of goodies.
If the world economy slows down further, we will be hopeful in getting the growth projected. Our exports will be down, forex will be down and earnings will go down.
We have to really monitor the budget to make sure that it hits the estimates, or else we have to be prepared for a mini budget after the election to adjust for shortages.
Dr. Yeah Kim Leng, Chief Economist, Ratings Agency Malaysia:
We were initially concerned that the budget will be expansionary, given the impending election, but our fears were allayed as the spending has been kept at about the same rate.
However, there is uncertainty on the fiscal deficit side because it will depend on world demand and oil prices, which will affect GDP growth.
Overall, it’s a responsible, responsive and realistic budget, but the middle class has been left out, just as in the previous budgets.
The cash handouts are targeted at consumers, but importantly, there is a need to ensure business is well supported because this is (the government’s) main source of revenue. The spending on small and medium enterprises is well targeted.
Dr.Lim Teck Ghee, CEO, Centre for Policy Initiatives:
I am dismayed by the budget. The BN government is scraping the bottom of the barrel. It tries to use cash handouts to influence the voters, but I feel it might backfire as people will realise that it was given purely for the elections and this may even make people more anti-establishment.
The government missed an opportunity to show the people that it is a prudent, responsible and reformist government. By my calculations, the government can cut operating expenditure by 20 to 25 percent without harming efficiency.
There is no clear policy direction, except that each ministry is wanting to spend as much as possible. It’s the same old story, leaving little left for subsidies. Subsidies should not go without proper analyses.
There is also greater spending on crime prevention, but what actually needs to happen is for the police to be better managed and focus less on political matters. They are throwing money in the wrong direction.