Partisan Budgets

I think a quote by Martin Wolf perfectly encapsulates our nation at this point in time.“Mr Obama wishes to be president of a country that does not exist. In his fantasy US, politicians bury differences in bipartisan harmony. In fact, he faces an opposition that would prefer their country to fail than their president to succeed.”

And I’m not saying that this is unique to Pakatan. A proportionate number of Barisan supporters want to see Lim Guan Eng and Khalid Ibrahim failing in their respective states so that they can use that gambit to win them back.

This can be quite clearly seen by the reactions to both the government and the shadow budget from opponents across the aisle. Questions about economic sense were predicated on political differences; not something that you’d want when numbers are involved and objectivity’s imperative for interpretation. No one’s doubting that both sides released budgets meant for the upcoming elections, but to what extent?

Numerous online commenters have compared us to Greece, for the fact that the government was in deficit for the 14th straight year; although that simply does not hold up to the facts. Our debt-to-GDP ratio is 54.8% while theirs is currently 142.8%. Theirs was 105% before the financial crisis hit.

And some commenters who noticed this said that ours wasn’t too different from Spain & Ireland, two of the PIIGS. Well, that is somewhat true. Their debt-to-GDP ratio is closer to ours, at 64 % and 67%. Neither country had accumulated high debts prior to the crisis; indeed their large deficits were a consequence of it. The huge capital inflows that were generated in the years preceding their respective economic crashes do not resemble Malaysia. Added to that is the fact that we have our own currency, something Spain and Ireland sorely need and needed to remain competitive with relative labour costs in Germany falling by the year.

Yes, the government didn’t address its long-term structural reforms in the budget, while the Pakatan Rakyat budget did. The structural reforms were not articulated, but that’s only because the Government’s plans are already in the 10th Malaysia Plan, which addresses the long-term spending priorities under the development compartment of the budget, and not to mention the Economic Transformation Programme.

Yes, the “goodies” in the budget were mainly catered to the lower-income groups and not the middle-income tax payers. But let’s not forget the fuel and food subsidies that cost the Government RM33.2 billion annually which predominantly favour the middle to higher-income groups who account for a higher consumption of these goods. Not to mention tax reliefs on private schools, books and medical insurance that only benefit tax-payers, the reform of real property gains tax that’ll curb speculation to benefit the property-owning middle class, the Kuala Lumpur International Financial district, and liberalisation of foreign investment in 17 sub-sectors amongst others.

One of the few gripes with some validation was the optimistic GDP growth rates released by the government. As Goldman Sachs said today, “the aim of narrowing the budget deficit to 4.7% of gross domestic product (GDP) in 2012 from 5.4% in 2011 may be a tougher one to meet, given the potential growth and revenue shortfall,”. If actual GDP were to be lower by one percentage point, the deficit will be only be slightly earlier than it was last year. If it were lower- we’d be in a worse position than we are currently in. Government revenues would fall as well. Considering how intertwined our nation is with the fate of the global economy, that is a distinct possibility.

The Pakatan shadow budget on the other hand suffered from overstatement especially with the potential multiplier effects and efficiency savings. No policies were elucidated on with regards to improving tax collection. Doubling the subsidy bill is short-termism at best, and with no apparent exit strategy, it is going to be very hard to take away once introduced.

But Pakatan have to be commended for coming up with a shadow budget, not to be dismissed as populism. While economic understanding might not always be a harbinger of ideological coherence, it is a step forward for the opposition coalition and for Malaysian democracy as a whole. The shadow budget, being as “people-friendly” as it was, had the added effect of putting pressure on the BN budget to increase support to those at the lower-end of the spectrum.

On top of that, the Pakatan Rakyat shadow budget had a few ideas worth introducing to our economy. The auction of Approved Permits is something that should be implemented soon, and the wider scope for Competition Acts should help to bring down prices of basic necessities. The identification of specific ‘cartels’ to target and to reform should be heeded by the government. Reducing the Petronas dividend to 40% of net projected profits will allow the company to plough back a greater amount for reinvestment so that there’ll be larger returns in the future.

You know politics as usual isn’t cutting it when sides are chosen before issues are discussed. Too often people are ideologues (or partylogues if you may) at the expense of constructive debate regarding our nation’s future. Fractiousness is a very slippery slope that will ultimately lead to nowhere. It’s time to stop dividing ourselves across party lines and come together as one for Malaysia.

*This piece is the personal opinion or view of the writer. The NRC11 does not endorse this view unless specified.