Is this Budget A Najibonomics’?

I was tweeting along as the Finance Minister, DS Najib Tun Razak, unfolded his second budget speech yesterday amidst the usual parliamentary ‘hecklings’. My tweets and interviews sparingly found its way in the mainstream media and as well the alternative internet-based media-portals.

 As I really have something to say rather than having to say something (that’s a minister’s job), it is perhaps best that I put it together in a piece. They say ‘you could only scratch your back best, yourselves’.

 Be that as it may, if fiscal prudence was what many might have been deluded to believe that the FM was committed to do, on the back of 13 consecutive years of fiscal deficit, the budget was everything except ‘fiscally prudent’.

Clearly it was never his intention. Mention of reducing fiscal deficit to 5.4% was relegated to the last minute. His mentioning of reducing it to 5.4% of GDP compared with 5.6% in 2010 (still suspect) is almost like tongue in cheek.

Yes, I understand the many vulgarities of global economic constraints and uncertainties. Yes, I understand that you can’t be cutting back the stimulus packages abruptly or you will slow the economy. Yes, Najib has to juggle and harmonise at times, the many ‘mutually exclusive constraints and demands’. But that’s the defining criterion of a leader!

‘Strategic Approach’ more so in a developmental program, the budget being the most short-term one, is always top-down driven and not ‘bottom-up’. You listen to the heart-beats of the rakyat insofar as getting feedbacks about how they respond to your programmes perhaps of their expectation and hopes as you are supposed to manage these.

But at the end of the day and in the final analysis, it’s your call, as the buck stops at you! You can’t blame the rakyat if it fails just because you consulted them and took their propositions. That’s Strategic Planning 101. Leader leads and takes calculated risk!

Overall, it is a budget crafted to appease as many a constituency as possible. On that score Najib has done extremely well. He has not forgotten to give adequate ‘goodies’ to all as to inject the ‘feel-good factor’ required to turn around the diminished confidence especially of the lower-income groups at being shortchanged and marginalized. From that perspective, this conforms to an election budget.

There are promises for more money for JKKK, KAFA teachers, imams, Orang Asli, NGOs, youth and women  as well as moratorium on PLUS tolls for 5 years, and various other ‘carrots’ dangled to the rakyat (read voters). But I hasten to add that moratorium on tolls for now doesn’t mean that tax-payers money is spared from paying hefty compensation to Plus though.

While it may bring in a lot of immediate ‘happiness’, the rakyat are quite oblivious of the longer term economic impact on their lives of an irresponsibly crafted budget that will boomerang back to them when subsidies are reduced or eliminated to fund for the ‘extravaganza’ and the endless ‘leakages’ in the delivery system.

The last thing a politician should do is to try to appease everyone. Very regrettably, Najib has a penchant for that and this budget speaks all. After his admission of the era of ‘Government Knows Best ’is over, his overly populist approach is at time, very worrying as this had aggravated his predilection for flip-floping.

First things first. So where is the GTP, the ETP, much less the NEM? If anything I could only see a few EPPs! But they are nonetheless very big ones.

Among large construction projects that will kick off under the 2011 Budget are the RM43 billion new KL MRT project; the RM5 billion 100-storey Warisan Merdeka tower; the RM26 billion KL International Financial district; the RM3 billion integrated eco-resort in Karambunai, Sabah; construction of multiple new highways; and the development of the 1,084-ha Malaysian Rubber Board land in Sungai Buloh.

The 2011 Budget was deemed a testimony for Najib’s commitment to reform. Quite sadly, the highlights appeared to be largely big-ticket construction projects rather than commitments to drastically restructure the economy by revamping efficiency, productivity and innovation.

I won’t deny the sprinkling of incentives in the other NKEAs like the Islamic Capital Market, Oil and Gas Industry and the advancing Green Technology. But budget allocation-wise they are relatively modest.

So it is after all, back essentially to ‘centrally-planned-pump-priming’ megalomaniac pursuit of ‘bricks and mortars construction and in supposedly Public-Private Partnership initiatives, ending ostensibly and invariably in government undertaking all the risks of non-delivery.

Analysts noted that the source of funding for mega-projects remained unclear and added that the market is weary of too many federally-guaranteed semi-government entities raising money from the market. So what is New?

Besides, the expectation of further liberalization as espoused by the NEM of other sub-services, to improve competition while stimulating private-sector participation didn’t get a boost at all.

The anticipation of the government selling down their stakes to raise revenue and create more liquidity and perhaps also avoiding the imminent ‘over-crowding’ effect (worse still crowding-out in the economy) in the equity market to encourage more foreign investors also didn’t see the light of the day.

On the contrary, the talk of Khazanah Nasional and the EPF launching a general offer for PLUS for over RM20 billion, is rife. While I may not be necessarily against it, if it is good for the rakyat, the conflicting and confusing signals Najibonomics is sending to the market is baffling at best and laughable at its worst.

Little wonder that analysts’ reaction to this Budget is mixed at best.

The prime minister most ironically insisted that the Budget was designed to meet the aspirations of the public and that the government would not take the easy way out or sacrifice the nation’s long-term interest for short-term popularity.

“We are not dreamers,” he said in his budget speech today. “We are realists. Our success is not mere coincidence but the result of clear and careful planning as well as firm implementation.”

For all the admission of the decade of economic stagnation and the ‘middle-income trap’ that we are stuck in, I honestly have serious problem digesting those last words. Is this budget a Najibonomics’?

I rest my case!

Dr Dzulkefly Ahmad, MP for Kuala Selangor.


7 thoughts on “Is this Budget A Najibonomics’?

  1. Yes go ahead spend as you like bcos its not your money.Ng Y Yen was correct if other people can have it why cant we have it bigger too.But at least dont further insult our intellingence by awarding the mega tower to another dormant RM2 paid up capital company umno or royalty linked or chinese taukey linked with no tender just like the new palace,new hospital.Pls treat the rakyat decent a bit by not thinking we are all dumb and stupid.

  2. Dear Dr Dzul

    A few salient points I noted in this budget.

    1. Najib assumes that Federal revenue would increase in 2011, on the assumption that economic conditions will improve. But on what merit does he base that assumption? The global economy is still in the doldrums. Even Singapore is expecting another recession – see Today’s Star. In any event, my guess is that, should the global economy improve, revenue drivers would move further and further away from brick and mortar type of businesses, and instead, be R&D driven; what is Najib’s initiatives to create our own Steve Jobs, or Mark Zuckerbergs? Yet, Najib’s focus remains on traditional revenue drivers. But, isn’t it proven today that, our over-dependence on the brick and mortar industry in the 90s, has left with us with excess capacity, while we struggle to hold on to our home grown brain power? How is having a RM5b tower going to help with this?

    My guess is Najib is going to ask the IRB to increase their tax audits to support his assumption on increased Federal revenue. Maybe it is a good time to tell your constituents to be prepared for the stress of tax audits!

    2) A clear lack of tax incentives/ business improvement initiatives for the SMEs. SMEs drive at least 75% of our economy, and they employ about 60% of our workforce. But by committing RM162b for civil service OPEX, Najib is basically saying, “the government will continue to fund excesses and wastage in the civil service”. Any SME operator would tell you of tales of excruciating waiting time for applications etc etc. Well, if the present government is not committed to civil service reform (personally, I think PEMANDU cannot achieve much – not while UMNO is still in power), then at least, provide even more tax breaks for the SMEs, eg increase the tax band for SME chargeable income.

    How is a RM5b tower going to help the main revenue unit of the country, improve their business conditions?

    Perhaps Najib is clearly aware of the nightmare of a bloated civil service, and I doubt he would dare take radical steps to reform, being mindful of the voter base UMNO has there. What I dread is this:- that he is planning to leave the mess to the next government, should Pakatan be successful in its endeavor to capture Putrajaya.

    3) Many people seem to be “applauding” the sale of PLUS to EPF/Khazanah team. Hold your horses for a minute:- firstly, EPF/Khazanah represent the rakyat’s money. If the government decides to stop toll increase for 5 years, it is a decision that would affect the Rakyat’s investment. BUT – what if the global economy further tanks (more likeliy scenario), and as a result, PLUS’s asset value deteriorates? You must understand, that PLUS’s asset value is basically cash driven (ie the tolls it collects). But the global economy further tanks, that would mean inflation, and therefore, the Ringgit value of these asset will also deteriorate. Is there a hedging by EPF/Khazanah to protect the fall in value? Or is it still assumed that, “economy would improve”?

    Secondly, and again based on the premise that global economy is so very uncertain, what would happen to PLUS’s borrowings? And EPF intends to borrow additional long term debt papers, leveraged on PLUS’s present cash flows?

    If that does happen, then what EPF/Khazanah will be left behind will be an asset that has the risk of a lower fair value and more expensive borrowing costs in the future.

    I can’t help but wonder, just what is this present government really up to, with all this asset shuffling? The government has more than enough authority to re-negotiate concessionaires’ agreements – be it toll, IPP, water etc.

    And yet, it doesn’t do this, but instead choses to pass on the risks and costs to the taxpayer, ultimately.

    I am mindful of the MAS bail out by EPF; I can’t help but have a chill up my spin, on what this UMNO government is capable of.

    Guess who will be left shouldering the head ache.

  3. nothing new really.
    Dr m used middle income earners(middle class) to help pay projects and subsidise the poor. that is why these guys are heavily taxed in terms for transportation, utilities, medical, all to help pay the cronies for IPP’s protons, AP’s, water and private hospitals. And that is why middle income earners are leaving the country in droves.
    The amount of tax, tolls, bills they pay, they get nothing in return.

  4. Assallamu’alaikum, Dear Sir, I am no economist neither do I hold a diploma much less a degree in anything. However I do hold a document which states I am a Malaysian Citizen!!!! To my horror and dismay the slew of mega projects at a time where the uncertainty of the global economic situation remains flimsy at best is something unbelievable. To even say and state the Honourable Prime Minister has taken hints from the Rakyat in preparing his budget can be considered a slap in the face to the Rakyat!!! What good is a 100 storey building to the man/woman on the street??? Apart from creating massive traffic jams while it is being built, what little greenery we have in Kuala Lumpur is further diminished!!!! 5 billion ringgit is indeed a HUGE SUM to spend on a building which we all know won’t even be fully utilised!!! Just look at Dayabumi, which if I’m not mistaken is one of the first so called sky-scrappers in Kuala Lumpur. Is it fully utilised?? Are all the floors in that building rented out??? The Twin Towers as well is another sky-scrapper which isn’t fully utilised as well!!! So do we really need another ‘white elephant’???? I can go on and on and on about how this massive amount of money can be better utilised for the betterment of the Rakyat and at the same time at the very least improve the standard of living or lessen the burden of lower income earners. BUDGET FOR THE RAKYAT???? I THINK NOT!!!!

  5. YB Dr. Dzulkefly,

    This is certainly not a Budget for the rakyat. It is more a budget for the BN cronies.

    The RM5billion tower will of course easily be bloated up to RM20billion or more due to ‘cost over-runs’ which is the usual practice with BN projects.

  6. Forget the budget..its a non-event compared to the decision to change the use of English to teach maths and science..Malaysia needs to spend billions to undo the economic damage that that decision will unleash in the years to come.

    Perhaps it was an underhand way of further encouraging the brain drain into private schools and overseas education. Well, Najibnomics is merely pryotechnics with lots of alphabets in the soup. Drink and have a good laugh before the the tsunami of an election part II.

  7. Assalamualaikum Dr Dzul,

    I made some research on PLUS Expressways (google) to try and understand the urgency of the matter (did EPF conduct an audit on PLUS before making a decision?)

    I found some interesting tidbits on their Indonesian ventures:

    1. They recently sold off their majority holdings in PT Cimanggis Cibitung which was awarded a RM1.2 billion highway project for RM 20 million. Was it forced? How much money have been spent?

    2. The other project (Cikampek-Palimanan) worth RM 2.7 billion has been delayed and construction haven’t even started yet. However, the acquisition of land is borne by contractor. Now the government of Indonesia is threatening withdrawal of concession if delay still persists. How much money have been spent in this project? I believe they issued some sukuk for this project.

    Is there an urgency on the government to privatise PLUS to avert another Sime Darby Energy fiasco? Their financial year ends 31st December so if they can complete the privatization early they don’t have to publish it.

    My research is only a couple of hours’ long so it may be inaccurate. I’m sure PAS and PR have more resources to dig further.

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