Saturday, October 08, 2011

Budget 2012: Najib Fails Reform Credentials

Budget 2012 fails to live up to the Prime Minister’s reform pledges in NEM, GTP and ETP

The expectations were high for a pre-election budget where Datuk Seri Najib Abdul Razak will stamp his “reformist” credentials. It is for the Prime Minister to put into action the various reform pledges made in his cornerstone policy blueprints – the New Economic Model (NEM), Government Transformation Programme (GTP) and the Economic Transformation Programme (ETP).

However, the announcement of the budget left much to be desired as little has changed beyond tweaking the budget of the previous financial year. Instead what is perhaps the most worrying is that Malaysians are like the proverbial frog in the hot soup – where the frog does not realise the soup is slowly but surely reaching the boiling point.

We may not yet be facing the crisis of Greek proportions, but Budget 2012 is doing very little to avert such eventuality, leaving the Malaysian economy nakedly exposed to the inevitability.

Federal Government Debt

Our Federal Government debt has increased rapidly from RM242 billion in 2004 to RM363 billion in 2009 and RM456 billion in 2011. That represents a marked 88.4% increase in debt over the past 7 years. It is also an increase of 25.6% or nearly RM100 billion over 2 years.

The increase in debt has increased the pressure on reigning in our budget deficit as our annual debt service commitments have increased to RM20.5 billion next year from only half the amount 5 years ago in 2007.

While our federal government debt to GDP ratio is still at a moderate 53.8%, a far cry from Greece's 117%, we are not far from Spain's 64% or Ireland's 67%, both of whom are facing economic turbulence of their own.

Our debt levels will only worsen in the next few years as we embark on record levels of infrastructure spending such as the RM53 billion Klang Valley MRT project which is expected to be funded entirely on debt.

Wages and Pensions

At the same time, our public sector expenditure is increasingly mirroring that of the European countries with ballooning civil service obligations. The budgeted expenditure for wages and pensions for 2012 is a whopping RM64.1 billion, an increase of RM6.2 billion or 10.8% budgeted for 2011. The increase is even more worrying when contrasted against the budgeted RM36.9 billion 2007, a 73.7% increase in just 5 years.

The GTP had promised a more efficient and cost effective government and civil service. What we are seeing from the Budget is only on which is indebting our children, entrenching our structural problems and very weak expenditure controls.

Economic Growth

Despite the Governments efforts in the ETP, our manufacturing and export statistics paint a starkly different picture.

Our export sector grew a miserly 2.7% in 2011 against 13.2% in 2010. However, we should be further alarmed by the fact that the growth was a result of increased contributions from exports of rubber, paper, textiles, clothes and shoes which grew in excess of 15%, and the petroleum products by 9.3%. Our electrical and electronics sector, which constitutes 26.4% of our total exports industry shrunk by 4.9% in 2011.

From the above indicators, there appears to be a shift away from higher value-added export sectors to the primary products industry such as rubber, wood, textiles and crude oil. This is the exact reverse of what we are trying to achieve via the ETP.

Budget deficit

Based on the Economic Report, we are expected to meet our deficit target of 5.4% for this year only because our revenues had grown beyond the expected in the 2010 budget due to very strong commodity prices. The Government has managed to collect RM21.1 billion of extra revenue on top of the originally budget RM165.8 billion. If not for the unexpected increase in government revenue, our budget deficit would have been a shocking 7.9%.

The Government is planning a 4.7% deficit for 2012, a figure which doesn't give hope that the 2.5% deficit target promised by Najib can be met by 2015. Even then, based on poor expenditure controls and the habitual ad hoc expenditure patterns of past BN governments, even meeting the 4.7% target will be a challenge, especially if commodity prices were to fall below expectations next year.

Optimistic projections

Finally, despite having achieved on 4.2% growth in the first half of 2011, and a slowing global economy in the face of another potential economic crisis, the Government has retained its unrealistic growth assumptions of 5.0 to 5.5%. To meet the target, Malaysia's economy will have to grow by at least 5.7% in the 2nd half of the year, which is highly optimistic to say the least.

The Federal Government's unrealistic expectations coupled with a budget which failed to demonstrate substantive reforms and political will for change makes the 2012 budget a highly disappointing and puts in serious doubt our ability to become a high income nation as aspired in Najib's New Economic Model.


Anonymous said...

I would have said that the budget proves that Najib is just extending the life of old policy NOT reforming at all. NOTHING has changed and nothing will change until BN is out of office. BN is incapable of reform. Period.

Its time to clean out the trash and you can tell by all the sprinkling of goodies around there is too much trash and the stink is covered up by cheap perfume of Najib's policies. Once the perfume is gone, it will stink even worst.

Anonymous said...

Dearest PM,congrats on yr generous budget but beneficial to certain people only who are not so desperate like the rest of us struggling for food everday (young unemployed graduates -RM0,SME workers RM,1000-,retirees RM0,SME owners RM loan shark borrowings,young families RM credit cards$$ debts,etc).The last thing we poorer folks want to hear is that you may want to give more money to those rich politicians who live in awfully big homes,bigger cars and talk nonsense zero work.Looks like to live comfortably in Malaysia we should either go into dirty politics or join the civil service which is becoming the largest in the world.Spare us a few leftover coins and we will be most most grateful.

Poh Siong said...

The figures you posted on the debt escalating is frightening!
without the same scale of progress on investments and drive to push exports, i'm nt sure how we can back this through.

It somehow feels like paying the minimal payments for the credit cards monthly, till the system eventually gives way.

TOKZ said...

***SUMMARY of BUDGET 2012 (BN Version)***

1) ANWAR IBRAHIM claims the budget tabled is a 'copycat' version of his & he also said it's "unrealistic". Isn't ANWAR IBRAHIM shooting himself in the foot by saying the so-called Budget he accused of being copied is unrealistic to implement??? Get a better excuse, Anwar!!!
VERDICT: Najib 1 - Anwar 0.

2) PAKATAN RAKYAT wanking leaders are claiming it's an 'ELECTION BUDGET'. Whether it's one or not, does it really matter??? What matters most is how beneficial will the budget be to 'the rakyat', correct?? Are PAKATAN RAKYAT donkeys running out of things to say simply becos' they find Najib's budget too AWESOME???
VERDICT: Najib 2 - Anwar 0.

3) No raise in SIN TAXES!!! How unbelievable, right??? I bet that AH PEK a.k.a. ZORRO UNMASKED is currently putting his own smelly shoes into his own mouth instead of his DUMB pipe. This BERNARD KHOO (Old Arse Zorro) hyped so much of booze prices going up & I foresee he will DIE soon due to BOOZE OVERDOSE since these prices remain unchanged.
VERDICT: Najib 3 - Anwar 0 & Bernard Khoo kena BUNGKUS.

4) ANWAR IBRAHIM thought by revealing his BAJET BAYANG (Shadow Budget) before the real Budget is out is a COOL move but only to get a BIG FAT SLAP on his own Sodomy loving face. I just can't believe how ANWAR could make it as a POLITICIAN. Doesn't this MALE ARSE LOVING dude know that the MOST important fundamentals in politics is NOT to reveal your TRUMP card before your rivals???
VERDICT: Najib 4 - Anwar 0.

5) Whether it's RURAL-CENTRIC or URBAN-CENTRIC, it's NOT the main issue. The Budget announced yesterday covers all walks of life. Some says the RURAL will benefit more, while, some says vice-versa. Either way, it's ABSOLUTELY CORRECT. However, what's INCORRECT are those words coming out from DONKEYS mouth such as ANWAR IBRAHIM, LIM KIT SIANG, LIM GUAN ENG, TONY PUA & those TALIBANIC PAS dudes.
VERDICT: Najib 5 - Anwar 0.

Najib & BN menang tanpa CABARAN.


Lee Wee Tak said...

I expected the BN budget to be damn good to attract voters...although it feels like one, but I do not see any bold innovative steps but only more bread crumbs hand outs only

AskChong said...

BN going to drive EVEN more talent out from the country if BN wins next GE (by using tax payer money to buy-election).

Anonymous said...

Obviously he knows how to "buy" people's heart with just few bucks, and sadly those people are the majority.

Ain't those goodies the basic things the gov should do with taxpayers' money? Is gov our giver? Is gov spending its own money?

Whenever GE comes close, every issue becomes no issue. Every issue is aftermath issue. There is still a long way for the majority to realize that how rich the gov is, how little it gives back to you, and those money are not from PM's pocket.

Anonymous said...

Unlike Greece, we still can use monetary policy to print ringgits and inflate us out of this debt crisis but at the cost of high inflation. As for the 4.7% deficit, it is definitely impossible. I think that the world economy will be going down either by end of this year or next year since Greece will definitely default and causes a domino effect across the globe. So, commodity prices will fall and export will decrease, the debt to GDP ratio will definitely goes up for next year. Well, the debt wasn't really a big issue since Malaysia managed to deleverage once back in 1997. But it might cause another economy slowdown again at the first 3-5 years as the country is restructuring itself again to normal. My message here is this, whether it's BN or PR who manages the budget, deleveraging will definitely causes an economic slowdown in the next few years. The question is, whether we should deleverage now during this global recession or when the world economy is recovering? If we do it now, we might suffer even more because we need to increase export in the future to boost our economy out of the deleveraging slowdown efffect. Another financial crisis caused by the EU will probaly take another 10 years to recover. So, it might really be a bad idea to deleverage at the moment. Anyway, I don't believe that BN will use the leverage capital nicely either. It's a lose-lose situation for Malaysia.