Some thoughts on the budget

Tomorrow will be another budget day. What can we expect from this?

I do not think anything drastic will be introduced, since this is really the last budget before the next General election.

I expect another round of goodies to be dispensed to the poorer sections of the people, which may not be a bad thing except that this act will be like pouring a small bucket of water into a house on fire–there might be a temporary relief of hardship for a month or two, but it will not have any long-term effect in solving the poverty issues of the poor. Even The old Horse has labelled this as ‘vote-buying’, but of course, as a seasoned politician, whatever thing said by him is not by chance, but may have a certain agenda to it. Is he finally drawing the line and throw his full support to someone else, instead of trying to play one against another? Whatever it is, he did play a part in ensuring BN did not get a good result in 2008.

The money from these goodies, be rest assured,will  come from the pocket of your and me, the tax payers. But I do not think that there will be any new taxes this time around. To introduce GST now will be a big political risk.

SO how to fund the development projects, as well as operational costs(including giving goodies to the people and the civil servants)? Future money of course. Borrow and spend, that is. This is what deficit budget is about. Use the borrowing to fund spending.

Deficit budget is not necessarily a bad thing. But persistent deficit budget, or a deficit which is too high, is not healthy. Part of the operational budget goes to fund repayment of loans taken to cover the annual deficits, and this means that less money will in fact be available for proper development spending.

As I look at the whole economic situation, the main thing that is affecting a big segment of people is that they do not have enough disposable income, especially money that can be saved to buy a roof over their heads.

As early as 2003, when house prices were still within affordable range, I have voiced out about the need for government to build medium cost house. In a memorandum submitted to DBKL on KL 2020Structural plan, I wrote this:

While the Plan recognizes that there is a shortfall of 20600 units of houses in 2000, we noted that there is an oversupply of high costs housing (51% of total). There is inadequate supply of low cost housing (24.5%) and medium cost housing (24.9%). There should be a more equitable distribution of low, medium and high cost housing.

One of the most important indicators of a world-class city is the ratio of house price/annual income. Kuala Lumpur has one of the highest ratio 3.27. This means that most of the population is paying beyond their means and about 30% of their annual income is used to pay for housing when it should be less than 5%. We urge the government to provide more affordable medium cost housing to cater for the working population in the inner city in order to attract these people  to stay in the inner city.

(the whole memorandum can be viewed here . I submitted this as I was then the State Secretary for a political party, and I wish to inform those whoare new to this blog that I am no longer political)

That was in 2003 . Now in 2012, the ratio of house price/annual income is even higher and most wage earners has no hope of buying a house in urban areas. This will have a long-term adverse social effects.

Something must be done , and though the government has of late realised the shortfall of medium cost housing, not enough has been done to build affordable houses for the middle-income group, which can only afford medium cost houses.

In 2003, when we talked about medium cost houses, we meant houses around 100,000 to 150,000. It  is of course no longer feasible to build houses within that range that can be classified as medium cost. A more reasonable classification perhaps would be houses around 250,000 to 300,000.

Interestingly, PR has come out with an alternate budget, which is also election orientated.  The main feature is of course cutting of certain taxes to boost disposable income, and the whole scheme is based on the assumption that huge saving can be obtained by having a cleaner and more efficient government. In other words, better management of leakages and wastage.

Whether they are capable of achieving that is of course up to your  own judgement, but if  more people believe in its achievability, then more votes will be going PR’s way.

Still at the doorway

Below is the list of  top 27 rankings of Global Competitiveness Index(2012-2013)  compiled by the World Economic Forum. For the full report, click here.

Malaysia is not doing too bad, being ranked 25 out of 144 countries. Malaysia’s GCI score remains at 5.1,  same as last year.  So in a way we did neither  regress,  nor progress,  which may seem on the surface to be not a  too bad thing . However, while our score has remained at 5.1, 4 countries has moved ahead of us, forcing us to drop  from our position of No. 21 last year.

South Korea, Luxembourg, New Zealand, United Arabs EMirates has overtaken us, to be exact. This is despite our government channelling considerable resources into transforming our economy since the present PM has taken over. We have not only not moved forward, but has remained stagnant , despite setting up various think-tank labs in Pemandu, employing many of the so-called top brains in trying to develop policies to lift us out of the middle income trap.

Perhaps it is time that we look at how other people view us, especially our weak areas, instead of just debating among ourselves how to transform our policies.

What are the problem areas in our global competitiveness, especially when compared to others?

The report by WEF in fact highlighted out problems. Look at the WEF graph below on our problematic areas:

In case the readers cannot read clearly the graph above, the top 2 problematic areas are these:

1. inefficient government bureaucracy

2. corruption

It is clear that our main problem and main impediment to our competitiveness is none other than our government. It is not only inefficient, but corrupt as well.

Then the next 2 problem areas are:

3. inadequately educated workforce

4. poor work ethic in national labour force

3 and 4 are the results of our education system. Again these 2 problems point to our government who is responsible for formulating our education policy, which has ostensibly produced  many A’s students, but many of these are not competitive once they start competing globally.

There is something  grossly wrong with our policy which has produced not only inadequately trained workforce, but work force with ‘tidak apa’ attitude, as we Malaysians know all along. Who can blame employers opting to employ foreign workers? Not only they are cheap, they are hardworking, with better work ethics, to say the least.

In a nutshell, and looking deeper, I think that if we want to become more competitive,  to make our workforce more productive with better ethics, and our civil service more efficient, we have no other choice but to introduce more liberal and broader based education system. We need to do away with affirmative-action-based policies, and curb corruption.

In September 2009, I wrote an article about this Global Competitiveness Index too, and one of my frequent commentators, klm, has made a comment  which I think  is still relevant. I would like to post his comment here:

Dr. Hsu. If you take a look at the list above  Malaysia (Editor: the list refers to the 2009 list not 2012), other than Qatar and UAE, these countries are the so called developed countries of the world, the tier 1 countries. Malaysia had done well in reaching the doorway. But crossing this door way is a very different thing from what Malaysia had done in the past. Malaysia is having great difficulties in make the crossover. The characteristics of these countries are:

1. Liberal and open economy
2. Other than a few, a vigorous and democratic government system
3. Strong governance, transparency and accountability
4. Little or no public corruption
5. Quality education system
6. Knowledge industries
Strong nurturing of talent
7. open immigration

These are many things Malaysia do not have. Without the political will to make the changes needed, Malaysia will still be at the doorway 10 years from now.

Three years from that last article on our competitiveness, we are still at the doorway, unable to move out and up into the top ranked nations.

Even though I wish my country well, I think klm may be right that Malaysia will still at the doorway 7 years from now.

In fatigue mood

When will be the General Election?

This question has been asked many times, and many hints were dropped but each times we only hear the sounds of the stairs but each time, the likely date came and passed without election being called.

This can only mean one thing. The person who holds the power to call the Election is not sure of a good win.

That person is of course the Prime Minister. He has to his disposal intelligence reports from the police, army, information department and his members on the ground. Though this sort of intelligence has its shortcoming, as in 2008 when no one (from  intelligence received) actually believed that opposition could win so many states, it is still one of the main influences that the Top has to take into consideration, since in the past, it has served as good indicators as to the mood of the electorates.

As I have said, the delay in calling the election can only mean one thing. PM is not sure of a good win. Without a good win, even if his team wins again, his own future is doomed. That must have weighed heavily in his considerations to let the many windows of opportunities slipped past.

The seats held by some of the component parties, such as mCA and Gerakan, are the main worries. Many members of both parties have become inactive and this has weakened considerably the election machinery of both parties, especially in the urban and semi urban seats.

That is why, instead of relying on these parties to win votes,  PM has adopted a presidential style of campaigning to reach out to the urban electorates. He would have succeeded in gaining more, if not for the scandals like NFC.

Even some of the issues that were considered part of Big Brother’s sacred duty to protect (members of UMNo like to talk about ‘struggle’), like education, were being liberated, albeit not systematically.

In order to appease the Chinese community, one Chinese independent school was approved to be built in Kuantan. Even though there were certain clauses in the approval letter that have given rise to some suspicions, it is still a big concession made to the Chinese educationists, a concession that would not be possible if not for the weak position of the Big Brother.

 AMidst all these, and the economy that is apparently doing well, and the hints by the Top Leader of the significance of 11,  many now believe that GE will be called in November, the last window period this year.

I believe party members of both sides are now really in fatigue mood. Just like the boy who cries wolf, after  many wolf calls, many on the ground would have felt so tired that they would not bother to go up the mountain to help the boy, so to speak.  Each time a window period appears, the ground members are mobilised, adrenalin flowed, only to have that window lapsed without anything happening, and adrenalin ebbing again and again. This spiking and ebbing of adrenalin would have made anyone tired and lose interest.

Coming back to the economy, is it really doing well? I suppose it is in better shape than many European countries. But many people on the ground , especially in the retail sector, complain that business is actually slow and times are tough. Many working people are complaining of diminishing disposable income, all these in relative to the perennial increase in food prices..

Hawker food is now in the region of RM 5.50 in coffee shop and RM 8 and above in the so-called Kopitiams and cafe. A simple hawker meal would have set a person back for at east RM10.

The political situation is fluid. BN may have a slight advantage being the incumbents, but PR has a real fighting chance to win.

Things could be even worse at end of the year or beginning of next, so November may likely be the last best date for BN to go into battle.