By Lawrence Yong
In the second of our series of articles on the two election manifestos, we take a closer look at their microeconomic implications and how their redistributive policies may or may not work out. We also put some effort to try and understand some of the reasoning behind the inclusion of specific measures in the manifestos.
A big chunk of both the Pakatan Rakyat and Barisan Nasional manifestos are dedicated to helping defray the rising cost of living in Malaysia – higher-income jobs, cheaper houses and cheaper cars, free healthcare, free education and lending a hand to the poorest of the poor.
But at the outset, both parties take a different stance. Pakatan views Malaysia’s wealth as being held hostage by an elite class. BN champions continuity of passed-on systems.
“Malaysia is a country with immense potential, its people strive for excellence bound by ties of brotherhood and fraternity,” the Pakatan manifesto states. “However, the power elite hinder our national aspirations. Corruption and greed thrive, while the people continue to live in hardship.”
Meanwhile, on the cover of the BN manifesto, Najib Abdul Razak, who has been a politician for 37 years, suits up with a smart red tie and stares out from his gold-rimmed spectacles, inviting Malaysians to let his party rule on.
BN sells itself as Malaysia’s best partner with the iron-clad formula for chasing wealth and prosperity together, citing a 55-year track record. “The record of this government in delivering on its promises speaks for itself,” Najib writes in the manifesto’s opener.
But as the only prime minister ever to very nearly let parliament automatically dissolve, some doubt that Najib truly believes the runaway success story that BN’s manifesto sells.
Terence Gomez
“The manifesto reflects badly on BN because it points out the same problems that are still with us. Basically, all we get is an attempt to provide all kinds of incentives to muster votes and support from all segments of society in Malaysia,” said Terence Gomez, University Malaya’s political economy expert.
Malaysia’s economy is trudging along fine with 5-6 percent annual growth in GDP (gross domestic product – goods and services produced) in the last 3 years after recovering sharply from a 1.7 percent decline in 2009. Most economists expect the country to post 5 percent plus growth in 2013 too.
And if you look at the promises of BN’s manifesto – it seems the best is yet to come. BN’s manifesto promises it can create 3.3 million jobs, lower car prices by 20-30 percent and build 500,000 houses for the poor at 20 percent below market prices.
With Malaysia in such good hands, why the need even for an opposition?
In comparison, Pakatan aims are more modest. It says it can add one million jobs mostly by cutting back foreign workers, gradually abolish a car excise tax – a move which has analysts divided on whether it will actually lower the price of a car in Malaysia, and add 150,000 low and medium cost houses.
Hafiz Noor Shams
For both manifestos, “those are all just numbers and there is no way to verify it… They can just pick out whatever numbers they like,” Hafiz Noor Shams, a research fellow from IDEAS said. “Helping the poor is not something that can be solved by handouts and subsidies.”
Who then really cares for Malaysia?
Under the BN manifesto, Najib’s job creation rests on government-linked corporations (GLC) such as Permodalan Nasional Berhand, Khazanah Nasional Berhad, UEM Group and Petroliam Nasional Berhad to draw in RM1.3 trillion of investments.
Oddly, BN’s manifesto has very little to say about reforming GLCs and talks only about a national trading company to source overseas markets for small and medium enterprises (SME).
Lim Teck Ghe
“The single biggest reason for inflationary cost in Malaysia is the GLC behaviour backed by licensing and rent-seeking behaviour which the government has failed to address,” Lim Teck Ghee, director of the Centre for Policy Initiatives (CPI) said.
By contrast, Pakatan appears aggressive. Pakatan said they would abolish monopolies from telecommunications to cable TV operators, from rice to sugar and highway projects and call for open tenders for government jobs.
Its manifesto said GLCs will be made to divest via management buy-outs (MBO) and produce more viable entrepreneurs. And they will back SMEs with a RM500 million fund to promote innovative ideas and inventions. Tax incentives will also be reshuffled to benefit SMEs.
In an unprecedented move, Pakatan promised it would increase the oil royalty to 20 percent from 5 percent for Terengganu, Kelantan, Sabah, Sarawak and Pahang – which are also the poorer states in Malaysia.
In a tit-for-tat move, BN has written in a similar measure in its manifesto despite its track record to the contrary. Studies showed that Malaysia’s federal government’s share of total government revenue before intergovernmental transfers was an estimated 90.7 percent for 2006-2010, making Malaysia one of the most heavily centralised federations in fiscal terms in the world.
Education is one of the biggest concerns in Malaysia, where most parents save up to send their children overseas for quality education and they often don’t come back. Malaysia has suffered a severe brain drain over the decades as a result.
Pakatan plans to offer free tertiary education and make universities independent to raise academic standards. It has a plan for retraining Malaysia’s low-skilled workforce. Pakatan is going to train one million school leavers without higher education to provide skills that can get them employed. Pakatan promises to build five technical universities and 25 new vocational schools.
BN’s promises are broad and appears to suffer a lack of ideas. They will build more schools of all types, train and fairly promote 420,000 teachers and hand out laptops to students.
Another major problem in Malaysia is rising household debt. Bank Negara Malaysia reported last month that new loans to households last year represents more than 80 percent of GDP at RM166.3 billion.
What do Malaysians typically borrow money to buy?
Cars is a big one. Both BN and Pakatan manifestos acknowledge the public transport system all over Malaysia needs improvement and promises to do that. Malaysians buy almost 600,000 new cars every year out of necessity.
Pakatan said that they would gradually abolish the car excise tax, which range from 75 percent to 115 percent cost of a car, in stages over a five year period. The government has said it collected RM30.2 billion through excise taxes between 2007 and 2011.
Pakatan said this amount could simply be ploughed back to the people to spend as they wish and some of it may go to subsidise lower petrol prices.
BN has promised a review of the National Automotive Policy since mid last year. And yet immediately after presenting the BN manifesto, Deputy Trade and industry minister Mukhriz Mahathir told Astro Awani that car prices can be lowered by RM 2,000-17,000 without touching the excise taxes at all. He will talk directly with car manufacturers.
This begs the question why the government hasn’t done this before.
To combat rising crime in KL city, BN said it would boost police personnel by 4,000 a year and volunteer police reserve forces by 50,000 and add on 5,000 motorcycles to its patrol unit.
Pakatan wants to train, allocate and raise staffing of the Criminal Investigation Department (CID) and favours reducing the general task force.
Both Pakatan and BN are strong on women’s rights and for good economic reasons too.
“Studies show that Malaysia could experience a 23 percent increase in output per capita as a result of more women holding jobs and becoming entrepreneurs,” The World Bank said in a November report titled “Unlocking women’s potential.”
BN promises to remove blocks to usher in more women’s participation in the political and the economic realm including setting up day care centres for working mothers in all government offices and government-linked companies.
Pakatan is going to set up a fund specially for women and husbands will be obliged to provide towards a contribution fund in proportion their income.
Finally, both manifestos touch on eradicating poverty in Malaysia. According to the World Bank, Malaysia’s growth was accompanied by a dramatic reduction in poverty, from 12.3 percent in 1984 to 2.3 percent in 2009.
“However, pockets of poverty exist and income inequality remains high relative to the developed countries Malaysia aspires to emulate,” the World Bank report said.
The BN manifesto said it would provide RM500 million in seed funding to increase the equity of Indian community to at least three percent, in a clear measure aimed at Indian voters.
Pakatan has refused a race-based economic approach and instead offers a needs-based handout : single mothers, the orang asli community and army veterans without a pension will be helped. A national commodity fund with RM100 million will be established for families affected by a sudden drop in commodity prices.
In a radical move, Pakatan said it would give RM300 per student each year to students in 1,854 national-type and private Chinese and Tamil schools, Iban, Kadazan and mission schools.
BN will increase the access to microcredit, including RM100 million for hawkers and petty traders. Pakatan said it would set up a RM2 billion fund to facilitate the implementation of a minimum wage hike to RM1,100 a month.
With so much promises galore, all Malaysians look likely to win either way – whether its 13 million voters choose Pakatan or BN in the 13th general elections. The poorer and marginalised segment of society – which lagged behind and were almost forgotten as Malaysia’s economy took flight – now has more spotlight on them than ever before, thanks to the opposition’s undermining power.
But whichever government comes into power, it needs to be careful of turning Malaysia into a welfare state, a real danger given the country’s rich natural resources.
Some of Pakatan’s policies such as lower oil prices and car prices may benefit the rich more than the poor and create even more massive traffic jams in KL. On the other hand, BN’s hope of a ‘trickle down’ effect from its grand economic ambitions would now have more check and balance and more for the poor.
Ultimately, a lot would depend on how the policies and measures are implemented in practice and what kind of measures would be taken to plug leakages, which has direct link to corruption, especially of the grand kind.
BN’s previous track record as far as these are concerned is less than exemplary although plans have been grand and sometimes even visionary. Pakatan’s is all talk for now but they have shown they can do better than BN, notably in Penang and Selangor.
Question is, will they be given a chance at the Federal level? And if they are, what will they make of it?
Tomorrow: How the manifestos rate in terms of fiscal prudence and broader economic policies
Yesterday: Who will win the war of the manifestos?
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