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Budget 2008 September 8, 2007

Posted by elizabethwong in Economy, Malaysia.
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Budget Day is the most exciting and glamourous event in Parliament, powered by pure adrenaline. For once, every MP turns up and so do all the senior journalists, business writers, foreign correspondents, TV and radio stations.

… And the wifi conked out even before 4 pm, and only started to work midway during the Finance Minister’s speech. :O

If this election budget is anything to go by, there’s nothing to cheer about, save no hike in ‘sin’ taxes! Sure there are some goodies here and there, but perhaps in an effort to please the corporate sector and everyone else, they’re spread too thinly to be substantive.

The Parliament staff muttered and grumbled over the sight of no-bonus, some of the journalists wondered why there were not goodies for SMEs, with one of my friends saying, “Two words – ‘We’re f*rked’.”

Oh, Finance Minister didn’t want to say anything after his presentation. Cabut with wifey, whom I almost bumped into when I dashed into the hall.

Below is an immediate response from the Parliament floor by Dr. Wan Azizah, after the unveiling of the Budget.

07 September 2007
Budget 2008: More Icing Than Cake

This is without doubt an election budget, spread thinly to please everyone. But it provides no solution to our deficit or gives us a much-needed competitive edge in the region. In short:- there’s more icing than cake in this budget.

The Budget deficit should still be cause for concern, even though it is lower, according to the Finance Minister; as we don’t seem to have the ability to reduce expenditure significantly and improve our revenues in the past years. There should be some fiscal prudence exercised, considering our economy is supposedly doing well and there is full employment.

Federal government revenue for 2008 is estimated to grow at a slower rate of 3.7 percent to RM147.093 billion, compared to the 14.8 percent increase in 2007. There is no explanation for this very significant drop in revenue growth.

According to a local analyst house, only one-third of the budget is said to be coming from the government. Where will the rest come from? We have to supplement this by way of loans, the issuance of bonds and through foreign funds such as Foreign Direct Investments (FDI) in order for the budget to succeed.

According to the Finance Minister today, our FDI inflows are strong. I beg to differ. FDI is steadily declining. In 2006, it amounted to an estimated USD4 billion compared to USD5.5 billion in 2001 China, India and fast-growing Vietnam are luring away key foreign investments, even though we offer very lucrative incentives.

There are two obvious reasons not addressed by the budget:

1. The prevalence of ethnicity-based policies which deter investors abroad, as well as investors from Malaysia. There is increasing outflow of our own capitalists setting up businesses in Vietnam and China, not just because of labour costs, or incentives, but we are plagued by red-tape, rent-seekers and corruption;

2. We cannot discount the effect of serious corruption in this country. The fall in Corruption Perception Index (CPI) is embarrassing and correlated with the fall in FDI of 14 % to RM4 billion.

If we do not reform these two areas, very little FDI will come our way. Then all our money and efforts will fall flat.

There appears to be no change in the economic growth forecast, compared to last year. It is still 6%. We still lagging behind China and India, while other countries such as Vietnam are doing very well.

While education is supposedly free now, there is a need to ensure every child to secure an acceptable level of literacy and numeracy. The emphasis should be quality and the evaluation of how we are doing things. We still haven’t resolved our serious problem of unemployed local university graduates.

I am very concerned about the full implementation of the Full-Paying Patient (FPP) scheme. We are only at an experimental stage previously. I fear, as we have mentioned time and time again, we en route to full privatisation of healthcare.

We cannot just be big on announcement but poor in delivery.

No one is averse to “goodies” for the people, especially for the poor. Even with the best of budgets, if we remain weak in implementation and rife with corruption, the people will suffer and bear the burden, which will eventually be reflected in their daily lives.

For example:- Putting more money into MSC and MSC-related project is not the solution, when we do not have a commercially viable operator. Without much to show, it will burden the government with real estate costs and capital expenditure. We can also view at the state of low-cost housing in the country to arrive at this conclusion. Furthermore, there is no evidence of socializing the nation’s wealth (“Merakyatkan kekayaan dan ekonomi Negara”) to those in need, regardless of ethnicity.

The other issue is the ballooning of the budget less than a year after it’s been announced. Take for instance, the new Palace. We were informed that it will only cost RM 400 million last year. Now apparently the costs have speculated to be double of the original costs. Or that the Northern Corridor Economic Region, we spent RM 11 million just on the launch. We can do so much to alleviate poverty substantively in that region with just this amount, through micro-credit schemes, for example. We had just debated the Supply Bill (Addition) this week. We have to add on RM 10.8 billion, close to 10% of the 2007 Budget.

Those who benefit most, appears to be the corporate sector. Those who need help the most – the middle and lower income groups – do not appear to benefit significantly from this budget. Private sector workers are still not getting minimum wage and Cost of Living Allowance (COLA) even though they are the main contributors to the national economy. There are no real incentives and little relief to offset the rising cost of living, inflation and other daily hardships.

Fundamental units of our economy – the Small and Medium Enterprises (SMEs) have little tangible benefit from it.

On top of that, it remains ironic that the poorer states, Sabah and Terengganu, do not receive more of the development allocation, considering they are oil and gas producing states that are keeping the nation afloat.

We have to review and reform the fundamentals of this country, resolve the scourge of corruption, cut wastage and leaks. These are some of the ways to stimulate economic growth and most importantly, improve confidence in our economy.

Dr. Wan Azizah Wan Ismail
Member of Parliament (Permatang Pauh)
President, People’s Justice Party (KeADILan)

Comments»

1. ghostline - September 8, 2007

Malaysiakini published a selection of UNCTAD’s 2006 FDI projections in late June (June 28 I think), when EC Commissioner Thierry Rommel created a furore by criticising the NEP as a major disincentive to FDI.

Malaysia’s FDI declined from US$ 4.6b in 2004 to US$ 4b (2005) to an est. US$ 3.9b in 2006. Malaysiakini also provided a table comparing Malaysia’s FDI with several regional economies: China, HK, Singapore, India, Thailand and Indonesia.

UNCTAD 2006 FDI Estimates (US$)
China: 70.0bil
HK: 41.4bil
Singapore: 31.9bil
India: 9.5bil
Thailand: 7.9bil
Malaysia: 3.9bil
Indonesia: 2.0bil

To put the FDI figures into perspective, if we do a purely 1:1 FDI (2006) comparison (discounting all other factors such as country, population and economic size), we see that:

For every US$ 1.00 of FDI coming into Malaysia,
Singapore received US$ 8.20;
Hong Kong received US$ 10.60;
China received US$ 17.90;
India received US$ 2.44;
Thailand received US$ 2.00;
Indonesia received US$ 0.51.

In fact, in terms of percapita FDI Singapore was the runaway top performer in 2006. This is probably because according to the incandescently intelligent Nazri Aziz, “Singapore is not a real country”.

Even Thailand, which suffered an internationally-criticised coup d’etat and suffered prolonged political instability for nearly a year has managed to attract twice as much FDI as Malaysia.

So what’s wrong with Malaysia, which in theory has so much potential? Dr. Wan Azizah has clearly reiterated the answers we all know beyond doubt.

2. V T - September 8, 2007

NEGARAKUKUKU -NEW!

3. wits0 - September 8, 2007

Besides, how many benefits from removal of Stamp duty exemption for husband-wife property transfer anyway? Clearly not many couples among the masses partake in such transactions. As if there aren’t more pressing needs!


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