Saturday, August 30, 2008

Budget 2009: Initial Thoughts

I wrote an immediate short column for Malaysian Insider yesterday after my budget forum on my thoughts with regards to the Budget for 2009 announced yesterday.

Not surprisingly, the media is full of praise of the RM35 billion allocated towards building a better public transportation system between 2009 to 2014. However, big numbers and big headlines aside, the actual allocation may not be that impressive.
Despite an impressive headline figure of RM35 billion allocated for public transportation, it actually only works out to RM5.8 billion a year over the next six years. In fact, if one looks carefully at the budget for the transportation sector, it has declined by RM1 billion to RM11.5 billion.
But what is of greatest concern will be the reckless spending spree the government seems to be undertaking. Barisan Nasional Pulai MP, Datuk Nur Jazlan wrote in his piece in Malaysian Insider that we should "Grow the Economy, Not Give it Away". Although he meant it in a different way, but I thought the title was apt in describing how we are just spending literally all our windfall (as opposed to hard-earned) tax revenues, particularly from the oil and gas sector, without a thought about saving for a rainy day.
Next year, the budgeted operational expenditure is another record RM154.2 billion. This figure is both shocking and scary as operational expenditure for the government when Abdullah Badawi first became prime minister in 2004 was only RM80.5 billion.

In just a short period of four to five years, government operational expenditure has increased by 91.5% or RM73.7 billion. This raises the question as to what the government is spending its money on which requires such substantial increase in operational expenses?

Even more worrying is the fact that most of the government's revenue is sourced from the petroleum sector. Last year, the estimated contribution of the sector to our government's coffers was 37%, but for 2009, this is estimated to increase to 46.4%.
There are a few separate tracks of criticisms that are worth further developing. And as I flesh them out over the next few days, I'll blog them here. So watch this space. ;-)

15 comments:

周瑜 said...

Good analysis you got there. I was looking around for some second opinion because I couldn't find anything exciting in the budget, yet almost everyone is praising it (well, which year they don't?). So it made me wonder is it really me or them.

Anonymous said...

Tony,

Sounds contradicting what you said here...

"Although he meant it in a different way, but I thought the title was apt in describing how we are just spending literally all our windfall (as opposed to hard-earned) tax revenues, particularly from the oil and gas sector, without a thought about saving for a rainy day..."

While your boss Lim GE and Lim KS keep talking about spending Petronas profits by giving every citizen a couple of thousands ringgit. Is giving back every citizen a few thousand ringgit a "thought about saving for a rainy day" as well?

Anonymous said...

YB Tony
I was anxiously hoping to hear some initiatives by the Government to position Malaysia not only to storm the weather but also to position ourselves and compete against the countries which we used to be in the same league with. Yes, the macro perspective. But I was disappointed. As for the micro, it met my expectations, i.e. minimal benefit to me, personally. :-( On the huge allocation for transportation, the farmers, fishermen, Sabahans, Sarawakians, etc, to me, it is a case of "once bitten, twice shy". Promises were made before but many did not materialize or worse, did not trickle to the targeted beneficiaries. It is all about implementation and execution. Maybe the Rakyat should give the same advise to the government as the Khazanah MD's advice given to the GLCs, "Executelah kamu sebelum kamu diexecutekan".
my19

Unknown said...

Anon 1.00 pm,

Please know that I'm also in support of the grants to the middle/low income group, not just LGE. This comes under the FairWage and Malaysia Bonus scheme in DAP's own budget.

But there's a difference between providing assistance to the people who need them, and spending reckless as BN is prone to do.

It means you cut down on unnecessary expenses, wastages etc., and savings go to the people. And the overall expenditure should be kept within our ability to finance it, while taking into account, saving some of our windfall profit taxes from the oil and gas sectors for future generations.

Tony

Anonymous said...

when are u going to take over from badawi?

i dun read budget but i read ass playingnews...

Anonymous said...

If every year we have let say 4% deficit budgets, in 10 years time, such deficits will add up to 40% on straight line basis. (in compounded basis, it will be more than 40%).

Such deficits, which financed by borrowings, if not controlled, will have very adverse effects on the financial position of our country as big chunk of our GDP are going to pay interest on borrowings.

Such deficits can only be arrested by ‘prudence’ in spending, spend on productive means as what you described in your articles, and of course by elimination of corruptions, wastages.

Managing finance of a country is more complex than a household like you and me, and yet such an important position is held by an ‘overworked’ PM who have no formal education in the field of finance or economics.

One can argue that he is assisted by Finance Minister I & II, but the ultimate decision is still rest on PM.

My opinion is, Finance Minister should be held by a ‘qualified’ economist or accountant rather than any Tom, Dick and Harry.

Meritocracy, meritocracy and nothing else but meritocracy can make our country a better one.

Anonymous said...

I wish to re-post what I commented in veonszu,

VoiceOfPolitic,

I also personally hope that 916 will happen. But, realitically, this is tough to become a reality.

If I can read Anwar’s mind correctly, 916 is just Anwar’s trick to test out BN’s MPs sincerity in wanting for a better Malaysia under multiracial ideology of PR. I used the word ’sincerity’ because Anwar clearly stated ‘no monetary’ perk will be offerred for these MPs.

So, if 916 happen, then rakyat will know that these MPs are of credible, with conscience.

If 916 not happen, then Anwar & PR have nothing to loose because they rather have MPs conscience rather than the ones only have ‘material’ perks in their minds. In a way, rakyat will also not loose out.

For sure, either way, Umno and BN will walk into history if they still stick to their ‘outdated’ mentality in next GE.

______________

Tony,

How you personally look at 916. May I have your view on this?

Anonymous said...

Tony,

Did you see the 5 ads on NST on HAK bla bla bal, so i was curious and decided to check it, it was a blog drcareesp and it was a video on STD/STI ie sexually transmitted infections

I'm of the opinion DAP could champion social causes beside all of us focusing on politics, you know our youth are crucial for the future.... do visit and get Tian Chua, Guan Eng, Anwar basically everbody on issues such as these to help our youth.

Uncle Yeoh

Anonymous said...

Tony

catch NST.... they are dumping politician and asking the public to take their HAK into their own hands

So, you better be revelant:) or the next draw, you are gone boy he he he

Wei Fun

Anonymous said...

When Bloomberg announced that Malaysia could put its credit rating at risk, I asked myself if Mohd Nor is that stupid. I have any admiration for him but I don't believe he is stupid.

According to Mohd Nor, the deficit is temporary and then kept wondering how it could be given most programs are NOT temporary. Can they let up spending on Sabah and Sarawak OR on public transport, etc. Then it struck me

GST in 2010.

All this is building to that. Come 3Q2009, the US and global economy should be recovering, inflation should moderate by then at the bottom of the curve and gives then the excuse to impose GST to close the gap on deficit even more spending.

But the problem is as soon as GST is imposed, inflation should again rear its head as China loosen monetary policies and the money raised by GST would eventually be channeled into subsidies again...

Of course all this assumes BN is still in power which we can all avoid if we kick BN out of power before 2010...

Anonymous said...

So we think it's not a fitting budget. It's easy to find fault but let's be progressive and move forward

If you had a free hand, what would be your Budget? And why? Do tell.

Anonymous said...

Why the bigger and bigger operating expenditure?

1. Petrol subsidies.

2. Good example below:
Y.B State Secretary of Melaka is assisted by the following officials :-

No.
Designation

1. Deputy State Secretary (Management )

2. Deputy State Secretary (Development)

3. Principal Assistant State Secretary (Management Services)

4. Principal Assistant State Secretary (Human Resources Management)

5. Principal Assistant State Secretary (State Assembly, Exco and Protocol Unit)

6. Principal Assistant State Secretary (Development)

7. Principal Assistant State Secretary (Housing & Local Authorities)

8. Director, Information Technology Services Division

9. Director, Melaka Sports Council

10. Principal Private Secretary to the Chief Minister

11. General Manager, Melaka Tourism Promotion Division

12. Acting Chief Executive Officer, Melaka Management Institute

13. General Manager, Melaka K-Ekonomi

14. General Manager, Melaka Education Trust Fund

15. Director, Stall Division

16. Director, State Economy & Bumiputera Social Council

17. Director, Resource Centre Division

18. Director, State Implementation Directorate

19. Director, Youth Division

20. General Manager, Chief Minister Incorporated

21. Director, Internal Audit & Public Complain Division

22. Director, Melaka Poverty Defender Division

23. Director, Melaka Infrastructure Corridor and Social Impact

24. Director, International Division

25. Executive Director, Melaka Housing Board

26. Director, Small & Medium Industry Division

27. General Manager, Malay and Islamic World Secretariat

28. Director, MyHome MyHeaven Division
29.
Director, State Legislative Representative Monitoring Unit

30.
Secretary, Road Safety Council

31.
Head of Unit, Public Relations of Melaka Resource Centre

WY said...

one thing that most people seem to fail to pick up is:

macroeconomics 101 - fiscal spending drives up inflation.

and the operating expenditures are simply ridiculous. any breakdown to justify for the increment???

Anonymous said...

The budget does not give any benefit to newcomers in the labour market. They earned less than RM2,000 a month. Any tax rebate will not benefit them. It is better for the toll rate to be abolished or lowered. Be more efficient and competitive, then the price of national car can be reduced to benefit young ones.

The BN's budget will never win the heart of Malaysia young generation. BN will be replaced for sure in the next general election.

Anonymous said...

Bank Negara is doing nothing. Zeti bolehkah? Is she capable enough? Atau kerana dia anak Ungku Aziz, the guy who criticised the Chinese middle men in the kampong to help poor Malays in the 1960s? Ungku Aziz is the first Malay scholar(?)who proposed to kick out the Chinese middle men who actually improved Malay rural economy.