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.


10 Comments (+add yours?)

  1. CYC
    Sep 28, 2012 @ 11:05:55

    The PR1MA affordable housing scheme introduced by the govt will not succeed as there are too many flaws in it. 1st of all, you can’t force financial institutions to loan someone who lacks the capability to repay. Secondly, how could the govt fork out so much to build affordable houses in Klang Valley when the land price is so high. Thirdly, the enforcement of Housing ministry and related agencies are so weak and corrupt that we virtually don’t see big developers especially the GLCs building low cost, low medium or medium cost houses anymore though the requirement still exists, why? Fourth, the govt is still far behind in recognizing the truth that prices set for LC, LM and MC houses were outdated as Dr Hsu rightly pointed. Fifth, Corruption has inflated the cost of house and make it more difficult for decent developers who genuinely wanted to comply with the guidelines. Sixth, lack of political will to address this problem when it could still done by setting up a fund where all developers who wish get a waiver from complying the LC..etc quota to contribute proportionally base on certain equitable amount, and this is idea was mooted long ago as but concrete step being taken. Seventh, broke off the chain of collection of under table money.


  2. Taikohtai
    Sep 28, 2012 @ 14:51:54

    I think the coming budget by BN will be the most heavily dissected and analysed. As the country is facing an election soon, Santa Claus is going to make an early appearance, accompanied with a beaming fatgirlslim Santarina. But what is shocking is that BN dare not reveal the audit of last year’s budget! In other words, the promises contained in it are just that but the fund$ have disappeared – yes, G Soros is again the culprit!
    Savvy Pakatan pre-empted BN chance to take any shine with their shadow budget a few days earlier. Expect lots of fireworks from BN but no bang.


  3. Ellese
    Sep 29, 2012 @ 08:44:35

    Reblogged this on The right of reply and commented:
    Fair write by doc. I hope we will get past some puerile arguments. Both BN and PR now are still committing our country into more debts with deficit spending. So please don’t argue on us being bankrupt. If any party argues as such please live on the moon. Our debt level is not dangerous to the point of bankcruptcy as can be seen by actions of both parties. (we can argue on international standard eg basel and stats if you wish)

    Secondly both are committing billions on hands out and yet having limited deficit. Rather than argue that one party gives unlimited handout please note both have taken that into account and still come up with limited deficit. We always criticise without thinking. If someone is against handout please state the limits of acceptability and principle thereof. This debate makes more sense. A debate on one handout is wrong because it’s from the opposing party is ridiculous.

    Finally please take a position on our corruption. Pr claims they have taken into accounts of the corruptions and consequent savings made. (See also last year budget) Please note that despite this they still come up with deficit budget. Bn budget has slightly higher deficit and able to put in more direct hands out. How come? Someone is simply not making sense. Let’s go deeper.

    So let’s look more objectively driven by principles rather than partisanship. We already know which side were on. Dont have to con our argument. Let’s move to things which benefit us.

    Let’s settle first issue. Don’t you think we should have limits on direct hands out? What’s the principle? Is indirect hands out better? Why? Or should it be reduced?or we essentially must move to a welfare state?


  4. Dr Hsu
    Sep 29, 2012 @ 11:19:41

    the questions raised have been dealt with in some of the earlier articles. Those interested may use the search machine to access earlier articles..Most topics have been discussed in the over 1350 articles in this blog.

    As a working person, I do not have the luxury of some full time bloggers to be at their computers all the time. And the topics that have been done with, I feel that unless circumstances warrant it, we need not go over it again unless there is something new coming out…

    (Editor: From now on, replies which have been reblogged elsewhere would not be published here, since the commentator hs already have a revenue to voice his or her opinion. This blog has also adjusted the spam level and those with 2 links or above or certain words or phrases would be automatically classified by the spam machine and sent to spam without going through this blogger..)


  5. CYC
    Sep 29, 2012 @ 17:46:10

    The govt contradict itself by increasing subsidies under the 2013 budget. In actual fact subsidies is increasing annually without fail. So, where is the commitment of reducing subsidies? By reducing 1% income tax essentially makes the tax paying work force even smaller at less than 2million. This indicates that we are hundred miles away from achieving high income society. The affordable housing scheme will eventually benefits more “speculators” than the target group. …..the list goes on to show all these sweeteners offered just to please voters for short term joys and in exchange of votes though by old horse’s definition it is only almost like vote buying but it is not…… philosophical as ever…………..


  6. Simple Sense
    Sep 30, 2012 @ 00:52:51

    All these hands out of cash appears to be the characteristic of socialist or even communist government system, if we look objectively at these from social political perspective. Yes, the average salary income Malaysian fall deeper into getting the ends meet financially. A fesh whole cleaned chicken in Malaysia is same price value as in California, imagine that. A 3 lbs roast chicken in California sold for RM17 to RM19, how does this compared to Ayam Mas in Malaysia? BN government needs to fix the ever rising cost of living. Majority of stable food in Malaysia are imported, even the ingredient for roti channai are imported! Same for Pakatan if they get voted into Putrajaya.
    Does the 2013 budget addresses the cost of living in Malaysia?
    Or just becoming more of a hands out society?


  7. Phua Kai Lit
    Sep 30, 2012 @ 17:15:31

    Starting salary for fresh university graduates today:
    RM1,800 to RM2,000 per month (I’m told)

    Starting salary for fresh university graduates in 1980?
    Only somewhat lower.

    This already tells us something …….
    No wonder so many of our educated, young people have emigrated for occupational reasons.


  8. Li Li Fa
    Oct 01, 2012 @ 18:31:15

    The 2013 Budget turns out to be a sweetener that will turn into a bitter pill to swallow.

    Its effect has wide and long lasting ramifications that will affect the accountability, sustenance and development of the economy. It is no doubt that the full effect will be born in years to come and by the future generations.

    To stop of these, a change must be installed; a new team must come in to stop the rot if we do not want our future generation to suffer. The new team must act quick to feel the pulse, stop the rot, and heal the wound, before the weaknesses turn septic, malignant and cancerous.


  9. Simple Sense
    Oct 02, 2012 @ 13:00:30

    It is already a cancer. The next government which try to clean things up will face some tough uphill battle. Corrupted people are very dangerous and capable of extreme violence. It is not an individual,it is all those involved in the corruption, the system and the culture itself.


  10. disgusted
    Oct 06, 2012 @ 16:01:16

    To know the situation, inflation…take a simple example…R2.80 a kilo for Kampung ikan in 2002 (used to be cheap protein food), now costs RM17 a kilo. Need to say more?


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