Tuesday, June 01, 2010

Economic Crisis Prediction

I've done a fair bit of writing even before I was elected into office in March 2008. I was just reminded about some of the things which I wrote and said by a friend, and it looks like 3 years later, my worries and concerns are becoming the reality.

I wrote about our Oil & Gas Windfall: Malaysia's Boon or Bane? (Part I and Part II) in July 2007 but The New Straits Times rejected its publication. It was subsequently published in Aliran's September issue that year. I wrote about how the Malaysian government has become addicted to rising oil revenues, failing to put in place expenditure safeguards and neglecting the other sectors of the economy, resulting in stagnant productivity. I also wrote about "political dutch disease" infecting our economic and governing institutions, how "easy-money" from oil revenues create and entrench rent-seeking behaviours.

Well, we see the result today. We have rapidly rising debt levels from RM240 billion in 2004 to RM363 billion in 2009, accounting for 53% of our GDP. Based on projections by the Government itself, we are faced with potential bankruptcy in 2019.

I've also made some predictions then as to how Barisan Nasional will fall within a decade, and the cause of its fall. On partial hindsight, I believe that the perfect storm is brewing for the ultimate fall.

I had in my presentation in September 2007 "After 50 years of Independence: What is the Road Ahead?" concluded with the hypothesis that the BN government will fall after an impending economic crisis which I had predicted to occur within 5-8 years. That will mean between 2012 to 2015. The economic crisis is caused by the fact that Petronas contribution to the Government will ultimately fall due to falling prices or depleting oil reserves, and our BN government's big spending habits will be difficult and painful to curtail.

The outcome is a civil service upheaval due to stagnating income, lack of bonus exacerbated by its bloated size due to the government's policy of being the employer of the last resort for unemployed graduates. The 1 million civil service vote will no longer be a fixed deposit for the BN government.

There will be a major crisis in UMNO which is held together by a intricate system of patronage, rent-seeking behaviour and money politics. But when the Government treasury dries up, and the largesse stops flowing, the glue disappears and UMNO will fall apart.

The failure of the economy will be the ultimate cause for a new government to take over from Barisan Nasional. Nearly 3 years after I've made the presentation, we see the relevant events unfolding right before our eyes.  It will happen, be it during the 13th or 14th General Elections. Watch this space.
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