Nurul turn-on over a meaningless budget?

Without breakfast this morning, this blogger went for an early lunch. While eating and flipping through the Sinar Harian at our neighbourhood warong, we were taken a back by PR's shadow budget announced yesterday.

Not because none in the picture understand economics and public finance.Yes, none....

Let's save Dato Mahfuz Omar any embarassment. Salahuddin Ayub is only an Anthropology graduate. Lim Kit Siang only knows law, politics and politicking. That rules out these three. .

Dato Seri Anwar Ibrahim may have been a former Finance Minister, but he only knows how to talk. This student of Malay Studies had Tun Dr Mahathir and Tun Daim assisting in the shadow.

And there is Tan Sri Khalid Ibrahim ....

.... who as Menteri besar should be the last to know about budget because narrow minded corporate businessman do not understand public finance and rakyat needs. Furthermore, he messed up Selangor's financial affair. 

Sinar Harian quoted Nurul Izzah described the budget as "memberansangkan" or a turn-on. Perhaps it turned-on the daughter of an adopted Korean because union-leader Syed Sharir claimed it is good for rakyat.

Or perhaps Nurul was actually inspired to see Pakatan Rakyat could steal the thunder from BN before tomorrow's budget day by issuing their own budget.

A pdf copy is available in recently very quiet Rafizi Rameli's website here.

Budget in Fantasyland

There is so much rhetorics that this people must be living in Fanstasyland.

Didn't they realise that a recent The Edge article already described their promises will send Malaysia to the poor house within two years? This is still only with relate to the Buku Jingga and not recent ideas like reducing car taxes.

However they claim they offer to reduce public debt and accused BN's program to assist the poor with BR1M, KR1M, R1M (if there is any), etc will make the country bankrupt. Once one yoko who hardly studied beyond secondary school by the name of Mazlan Aliman made a similar claim to claim Felda is bankrupt. 

That is a cheap propaganda trick to "accuse others of the same mistake before one is criticised for the mistake that is truthfully their's."

Government debt situation fine

Before talking about the shadow budget, some low hanging fruit first.

Government spending is fine and within the 55% limit set.

The above is a graph from Economic Malaysia here of Government Debt to GDP ratio over the years and it shows we are stagnating on the Debt/GDP level. In the long term, Government have been cutting back on it's public spending.

They even prepared a set of FAQ on Government debt. [Click here for Part I, here for the full FAQ, and here for the condensed version]

Furthermore there are mechanisms against Government over spending. Read Mythbusting: Government Debt Edition Part1` and Part II. 

Promises impossible to keep

Then on the Pakatan promises as per the Buku Jingga, it already adds up to RM206.5 billion additional.

This have been said many times before and The Edge also did an analysis and came to the same conclusion that their promises will lead Malaysia to bankruptcy in 2 years. [Read in Pisau here.] 

So this idea of offering lower car taxes will dent further the public budget, thus how will the balance and balance it. At best, they can only claim to plug the leak in corruption. Did they manage to do so in Selangor?

The Edge commented below:

Since corruption and leakages can only occur for procurement-related expenditure as opposed to fixed charges like salaries, any savings can only be made from this portion of the budget.  If you get 10% savings from procurement, that would be just RM 8.43 billion extra – hardly enough to pay for the opposition’s election promises.  Even the entire sum related to procurement expenditure – RM 84.3 billion – is short of the RM 206.5 billion needed to pay for its promises to Putrajaya.

The key point is this: It is easy to say that savings can be made by reducing leakages, but nobody really asks how much you can save. While 10% of procurement – related items can yield a significant figure as explained above, but it is not so significant when measured against a slew of promises that cost so much more to fulfill. 

Projection from a leak?

On Anwar's shadow budget, there is no way to verify and comment on the numbers below:

Perhaps it is only a figment of their imagination because unless it is leaked by the Ministry of Finance, it could be only numbers plucked from the sky and used to make all sort of claims against Government's own projection.

Datuk Fauziah's name will turn up again and accused of leaking if the numbers are similar although she is not in charge of budget. 

Debunking PR rhetorics

At one look, one can guess that Anwar's budget is rhetorical and politically motivated. It is also inconsistent and hypocritical. Sinar Harian reported.

BN politicians responses can be found in Sinar Harian here and Just Read here. Our immediate response, below:

Affirmative action

Sinar Harian reported that their budget will take into account and not ignore the interest of all races..The "Ekonomi Rakyat Negara Berkat' theme promises affirmative action that bring equality to all races.

One would have thought that on the first day of DAP administration of Penang, they gave a frontpage one liner of "No more NEP." means no more affirmative action. Now that Malays are not giving votes to them, is affirmative action back in the vogue?

Anwar was also reported to say that to help the poor, there is no ethnic consideration. Didn't NEP specify so? Then he must show his implementation plan that his would be fool proof.

Assuming there is leakage on the NEP, it's short of target is not necessarily 100% entirely due to leakage. There are many other factors.

Can Anwar offer us a solution or plan that ensure no just leakage and corruption? Anwar should be mindful that affirmative action has taken a different playing field and thinking.

Be honest? What is his rollout plan? The viability lies in the fine print and not the rhetorics!

Leakage?
 
All Anwar can only say is that their plan will reduce leakage. Now we have heard that many times but where is the economic plan to bring in the bacon ... opps we mean, bring home the rice.

Where is his economic sectoral plan?

Anwar claimed all tender award will be open. There must not be any monopoly, he claimed.

One wonder whether it will be in the example of Selangor. The 2010 Auditor General Report revealed many negotiated tenders by the Selangor Government and it have been on the rise since they tookover the Selangor Government. (see above from the report)

Kumpulan Sementa has monopoly on sand dredging and it is given only to crony companies with leak dockets. Is that how no more monopoly works?

One only need to wait out because in a matter of time, if he becomes Prime Minister, he will says the need for economy-of-scale to reduce cost and be competitive. If he doesn't become one, the better for all of us.

Excerpt from Economics Malaysia here below on plugging leakage:  

There’s however only so much you can do – some part of the overage in spending is due to government departments trying to “spend up” to their budgets, some part to corruption, and some part to incompetence. But some of it is purely down to the inherent inefficiency of centralised procurement. Unless you’re willing to trust your people enough to do their own individual purchasing, you’re not going to get “market” prices.

As well, shifting to open tenders will generally only save money for supplies, but not for more complex projects where the big money is actually spent and contract fulfilment is a greater priority than cost.

Trust me, it’s not only governments who have to deal with overpriced goods and services. These problems are endemic within the corporate sector too. I’m also wondering how much more cost-effective PR’s policies would be relative to what the government and Pemandu are doing now in reforming the government procurement process. Believe it or not, there have been changes and progress made.

"Nationalisation" of 1MDB

Anwar was reported by Sinar Harian to claim to do "nationalisation" through Khazanah Nasional, in particular of IMalaysia Development Berhad (1MDB). That is more spending without any revenue in sight to buy back companies that is deemed as privatised.

Privatisation serves to encourage public sector involvement in the economy. Is Anwar trying to revert back to the inefficient  involvement of Government in businesses again?

State run economy smells socialism. It smells end of free enterprise. Hope the Chinese businessmen can read that and see how their bread is going to get buttered.

On 1MDB, it has a policy of no politicians as member of the Board of Directors in it's Article of Association or Company "Constitution." What will this Malay Studies flunkie do when he realised he can't give it to his political boys for monthly stipend?

Rocky Bru's got response for 1MDB here. Throw more 1MDB issues please.

Oil and Gas

Anwar said PR would like to establish state oil and gas companies for states with oil and gas revenues as a source of revenue to the state.

It may sound like Anwar is duplicating many Petronas-es at state level. For what?

That could also be interpreted as nationalising the oil and gas sector and forming a new layer of rent seekers instead of encouraging private sector investment in the sector.

It is reflective of Anwar's understanding of the industry and seemed to miss the boat. In the oil and gas industry, cost of investing in new oil fields has sky rocketed and Petronas itself is seeking for more money.

How will having more state oil and gas companies help the plight or competitiveness of Petronas?

Furthermore, each state forming oil and gas companies means more credit exposure to the Federal Government. State oil and gas companies cannot secure loans without the guarantee of the Federal Government.

At a time when Governmnet is reducing expose to businesses and passing it to the private sector, Anwar is exposing the Government more to businesses and corporate debt. Sounds like another dumb idea from Rafizi!

More issue when we read through Anwar's populist and nitpicking rather than wholesome budget. THere is no mention of any economic policies, budget strategies to raise revenues, development plans, etc.

Back to Nurul's turn-on.

It is none of anybody's business but it does get us. Do you and Raja Shahrir talk economics and public finance to get babies?



Edited: 2:00 AM 28/9