‘Najib’s budget inferior to Pakatan’s’

By Stephanie Sta Maria

Refsa calls Budget 2012 one that sits on shaky foundations and contradictions and lacks clear ideas for resolving criticial issues of today.

PETALING JAYA: A non-profit research institute has produced a focus paper thwacking Budget 2012 for “scattering the rakyat some fish, while building lavish yatchs for a privileged few”.

The same paper also heaped praise on Pakatan Rakyat’s shadow budget which it hailed as being “holistic”.

Entitled “Budget 2012 – Eclipsed by its Shadow”, the paper was written by the executive director of the Research for Social Advancement (Refsa), Teh Chi-Chang, who is also a contributor to the shadow budget. He however clarified that neither he nor Refsa were paid for his services.

In comparing both budgets, Teh concluded that Budget 2012 is inferior on three counts – its overspending, its castles in the air and its move towardsRM1 trillion debt by 2020.

The government has projected that deficit will fall to 4.7% of gross domestic product (GDP) for 2012 but Refsa believes that this is over-optimistic.

“The government’s real GDP growth projections of 5-5.5% for 2011 and 5-6% for 2012 are widely considered as over-optimistic,” Teh said in his paper. “The government’s nominal GDP growth forecast for 2011 is also exceptionally high”.

He explained that deficit is calculated as a percentage of nominal GDP not “real” GDP, and a slower GDP growth would affect the deficit in two ways.

First it would mean a smaller GDP total which would amount to a higher deficit based on GDP percentage. Second the smaller GDP would result in smaller-than-anticipated tax collections and the revenue shortfall would increase the deficit.

“Together with the government’s historical record of consistently exceeding its budgeted spending we are of the view that the 2012 deficit will be closer to 6% than the targeted 4%,” Teh predicted.

“If we were to recalculate using BN’s RM230 billion expendicture plans and Pakatan’s more conservative revenue and GDP forecasts, the deficit would be equivalent to 5.5% of GDP.”

“Conversely if we used Pakatan’s RM221 billion expenditure plans and BN’s more optimistic revenue and GDP forecasts the Pakatan deficit would be 3.7% of GDP.”

A focus on hardware

Teh then pointed out that the 100-storey Warisan Merdeka project introduced under the previous budget was been stealthily proceeding despite strong protest from the rakyat.

Although Prime Minister Najib Tun Razak made no mention of it in his budget speech this time, Teh noted that the Economic Report stated that Permodalan Nasional Berhad (PNB) is finalising the building design and work is set to begin next year.

“Mega-projects and government largesse still loom large in the budget and we cannot help but feel that it is built on delusionary foundations,” he said.

“The reality is that 70% of our workforce is qualified to SPM-level at best, 40% of Malaysian households subsist on monthly incomes averaging RM1,500 and more than a third of household heads are employed in the informal sector.”

Teh questioned whether policy makers notice the contradictions between the upper middle income status and massive subsidy bill which is expected to balloon to RM33 billion this year.

He also wondered which upper middle income Malaysian would shop in the Kedai 1Malaysia thrift stores or sample the Menu Rakyat 1Malaysia meals.

“The budget’s focus is still very much on “hardware” even when it concerns education spending,” he said. “There is a glaring absence of any mention of quality or employability of school-leavers.”

“Aside from the 70% SPM-level workforce, a quarter of those who make it to university remain unemployed for four months after graduation.”

A 14th year of deficit

Teh further warned that if Malaysia continues adding debt at the current rate of RM50 billion per year the nation’s total debt would double by 2020 to nearly RM1 trillion.

“Assuming interest rates of 5% the interest charges alone would be RM50 billion,” he calculated. “That is the cost of the MRT.”

“RM1 trillion works out to RM590,000 per taxpayer. With 80% of households currently earning just RM2,500 a month on average and with oil reserves dwindling, it’s hard to see how that can be repaid.”

“2012 will be the government’s 14th consecutive year of a deficit budget. We must keep an eye on public expenditure or Vision 2020 will crumble into broken dreams.”

Source : FMT