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Sunday, October 12, 2014

Is our budget just “nice to hear” but unworkable?

A “people economy” amounts to nothing if we keep failing at macroeconomic management.
COMMENT
najib_300By TK Chua
From the day when I first learned how to follow a budget speech – that’s 25 years at least – I can safely say that each budget has tried to do all (or at least many) of the following:
  • augment economic growth with equity;
  • rein in fiscal deficit;
  • attain fiscal consolidation;
  • develop knowledge and a high technology economy;
  • emphasise the services industries,
  • strategise and pick “winners”;
  • enhance human capital development;
  • empower women;
  • provide the best in education and health care;
  • build infrastructure like roads, rails, bridges, telecommunications, water and electricity supplies;
  • restructure society and help Malays and other Bumiputera;
  • preserve and protect the environment;
  • provide security and safety for the people;
  • develop Malaysia as a sporting nation.
This is where the proof of the pudding is in the eating. For years we have formulated pompous budgets which are nice to hear and easy to accept by all.
But where are the results?
We have enjoyed decent economic growth no doubt, but where was the distribution? How come after so many years of “distribution and restructuring” exercises, the number of households qualifying and requiring BR1M is increasing instead of decreasing?
We provided billions in our budgets and have come up with the best of programmes to help Malays and other Bumiputera, but how come they have remained the most deprived, at least based on official statistics?
We provided billions for education, but how come our schools and universities are unable to produce a competitive workforce and have suffered poor international rankings?
We provided allocation for environmental preservation and pollution control, but have we looked at our air and water quality lately? Have we looked at our rivers, ponds, lakes and coastlines? Please tell us which part of the country is not polluted?
We talked about youth and sports development, but have we looked at the standard of our football and our recent performance in the Asian Games?
We talked about billions allocated for infrastructure, but please tell us which of these was not privatised where the people must pay market price for using it?
We have been talking about fiscal consolidation since after the Asian Financial crisis of the late 1990s and yet our deficit and debt in absolute terms have continued to escalate. And this does not yet include off-budget obligations and liabilities that are gradually gaining significance.
We talked about a “knowledge” and high-tech economy and yet our reliance on unskilled foreign workers has never been more pervasive.
We tried to pick so many “winners” – lychee and mata Kuching cultivation, herbal medicine, entertainment and movie-making, halal food and industry hubs, wafer manufacturing, tuna fishing and cattle breeding (NFC) – yet which of these was successful?
We claimed people’s security and safety were of the utmost importance, but crime is more rampant now than ever and almost every housing estate must employ its own security guards.
The prime minister talked about a “capital economy” versus a “people’s economy”. To me, it does not matter. The two are intertwined anyway. What is the point of creating wealth if it does not benefit the people in general?
A capital economy and a people’s economy are part and parcel of macroeconomic management.
It has two components:
  • did we tax the right people the right amount and spend on the right programmes in the most cost-effective way, and
  • did we set our policies on interest rates, inflation and ringgit right?
We talk about increases in the cost of living as if we can curtail it through Kedai 1Malaysia or price control measures at retail levels.
The other side of an increased cost of living (inflation) is our ringgit losing its value. Have we thought about that? Have we thought about why our ringgit is losing its value? If prices of homes and other properties have gone up two times over the last ten years, what does that tell us about the value of our ringgit?
Similarly, if taxation is regressive and if spending is not cost-effective, how then can we achieve our social and economic objectives?
If we have programmes that suffer from haemorrhaging leakages, does it matter how beautiful the programmes are or how large the budget allocation is?
TK Chua is an FMT reader

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