By Lawrence Yong
In the third of our series on the party manifestos, we look at the what’s really lacking in both manifestos – a clear drive to rein in Malaysia’s fiscal policy, to manage oil wealth and other bloated government-linked corporations. We question if either Barisan Nasional or Pakatan Rakyat has the right engine to drive Malaysia forward?
Manifestos aside, know this: Neither Pakatan Rakyat nor Barisan Nasional leaders will be so lucky as to get a clean page to rewrite government the way they dream about, even if they get voted in with a strong majority in Parliament.
Apart from inheriting hundreds of years of British rule and before that a collection of sultanate states, Malaysia also now has 30 odd years of Mahathirism to work through, competing corporate interests, and a ticking clock on vision 2020 to make Malaysia a developed nation in seven years time.
There is much historical baggage and past governments’ mistakes to address, not the least of which is a somewhat bloated ruling machinery with lots of government-linked companies extending, some would argue invading, into the private business sector.
How will a Pakatan or a renewed BN mandate restructure Putrajaya-driven fiscal policy which is now characterised by an institution of basic food and fuel subsidies, rent-seeking behaviour and unstable tax collections and oil revenues?
Najib Razak
Instituted by his father Abdul Razak Hussein, who was prime minister in 1970-1976, Najib himself is a product of the New Economic Policy (NEP). After 38 years, the NEP was scrapped and replaced by Najib in 2009 with the New Economic Model (NEM). Critics said NEP has failed to achieve one of its stated aims, which is to raise the participation of Malays in the economy to 30 percent.
The Pakatan manifesto’s biggest changeover is that it promises to be the first Malaysian government to strive for a race neutral economic policy. In a marked departure from the past, the BN manifesto says it is also chasing the same middle ground.
“We believe in social justice, and being inclusive, touching and improving the lives of all Malaysians irrespective of race or religion,” the BN manifesto notes. Najib himself has actively built bridges with Chinese and Indian communities.
But the fact remains: BN’s main component parties are still organised around racial and ethnic lines. Pakatan’s three parties can boast of having members from all three major races in Malaysia. They also have an almost equal share of Parliamentary seats compared to UMNO’s dominance within BN.
Looking back at Najib’s economic track record of the last four years, it would also be very hard to argue that he has truly broken free from the previous BN administration’s shadow. The BN system has long been associated with rent-seeking behaviour by companies eager to obtain cheap land for development and easy to do, high return projects. BN’s manifesto sadly disappoints for not spelling out any marked departure from the old ways.
The BN manifesto simply reads like a long menu list of hospitals, schools, expressways and road projects, high speed railways, urban development, places of worship, houses, and infrastructure upgrades to be erected – projects made to order.
“The NEP is very much in force, not officially but its principles are still enforced in the ministries and state governments,” DAP’s Lim Kit Siang recently blogged.
Under Najib’s NEM, Government Transformation Programme (GTP) and Economic Transformation Programme (ETP) – government-linked agencies such as Permodalan Nasional Berhad, Petronas, Khazanah Holdings and recently 1Malaysia Development Bhd – which reports to the prime minister’s office or finance ministry – drive much of Malaysia’s top companies with their web of stakeholdings.
No doubt power is concentrated in the position of the prime minister. “Unlike her neighbours in Asia and beyond, Malaysia has gone the other way, consistently centralising revenue sources and responsibilities,” wrote Francis Hutchinson, a research fellow at Singapore-based think tank ISEAS in a study on Malaysia.
Federal-controlled Kuala Lumpur has been the epicentre of Malaysian development since independence in 1957. Since then, Malaysia has produced 14 billionaires, according to Forbes magazine. The most prominent billionaire bumiputra entrepreneur Syed Mokhtar AlBukhary, is now seen as the Malaysian government’s prefered business partner. He owns everything from rice to sugar, post offices to defence and the car business. His every move makes headlines and Syed Mokhtar was last seen eyeing the national airline no less.
In contrast, Pakatan’s manifesto says it will abolish monopolies and wants open tenders for all procurements in public entities. “Monopolies are an encumbrance to economic growth and discourage competition. Pakatan Rakyat economic policy will focus on breaking up monopolies,” the Pakatan manifesto notes.
BN manifesto does not even mention monopolies.
To this end, the BN manifesto with its 17 broad thrusts and over 150 promises does seem a little overblown for the fact that it hardly mentions any measures to control misbehaving ‘corporations’, with only one cryptic policy statement.
“Ensuring GLCs continue to develop entrepreneurs by divesting non strategic GLCs and increasing outsourcing programs for Bumiputera companies,” the BN manifesto says.
To its credit, Pakatan’s ‘people’s manifesto’ does have a bit more on corporate governance:
Under the heading “revitalising competition” Pakatan promises to dissolve 1MDB so that Khazanah remains the only state investment body and disposal or handover of GLCs which are not involved in businesses of national importance.
The Pakatan manifesto spells out that it wants sustainable development. For the sake of the environment, Pakatan said it was prepared to halt the operations of the Lynas rare earths plant in Gebeng, Pahang. In the same vein, it will review the Petronas-driven Oil Refinery and Petrochemical Integrated Development (RAPID) project in Pengerang, Johor. Pakatan also said they would reform logging laws and activities.
On the environment front, the BN manifesto promises to invest more in biomass and solar power. It will revitalize rivers and streams, offer education to inculcate a love for the environment and employ state of the art technology for waste disposal.
Economists’ biggest worry however is that neither BN nor Pakatan is taking fiscal policy very seriously. On record, Malaysia has practised an expansionary fiscal policy for at least 15 straight years now with government spending rising faster than its revenue collection, despite record high oil prices. According to experts, Najib’s government has accumulated much debt, both seen and unseen (guarantees for GLCs).
“Both have not detailed policy positions on how to deal with debt issues…they cannot tackle this very much in a manifesto….but I would have hoped for at least benchmarks or targets,” Lim Teck Ghee of the Centre for Public Initiatives (CPI) said. “So far, the BN government is spending like there is no tomorrow.”
CPI’s Lim and 18 other academicians/economists recently signed a joint statement to petition for more disclosure of the true level of government debt and a more politics-free management of the country’s finances, before it reaches a crisis stage.
In 2009, Najib took over government reins under tough global economic conditions. He implemented a RM67 billion stimulus package and a year later, talked about ETP to draw in RM1.3 trillion investments. This helped Malaysia achieve a soft landing in 2009, when its GDP shrank by 1.7 percent even as economies worldwide sank.
But the problem is Najib has not stopped spending since.
Economists nerves are not calmed even as the government budget deficit has since receded back to 4 percent in 2012, after dipping to its largest deficit in terms of GDP (gross domestic product – goods and services produced) in over two decades in 2010 at about 7 percent.
“There must be greater commitment to fiscal discipline even though it is not at a worrying stage. This is in order to sustain investor confidence and ensure it does not pose a threat to economic and financial market stability,” Yeah Kim Leng, chief economist at Ratings Agency Malaysia (RAM) Bhd.
For example, BN started handing out money under the BR1M scheme in September 2012 and estimates note that close to RM4.5 billion has been handed out. Under the BN manifesto, BR1M handouts will rise to RM 1,200 per household from RM600 and it will be widened. BN promises free laptops to students, in addition to last year’s RM200 each handphone subsidy and may hike pays for pensioners, teachers and civil servants.
Pakatan promised a 15 percent pay hike for police personnel to be implemented in stages. Pakatan claims they originated state handouts for the poor but only because it had achieved a surplus under Penang’s state budget. Under Chief Minister Lim Guan Eng, Penang recorded a budget surplus of RM88 million in 2008, RM 77 million in 2009 and RM33 million in 2010, and RM138mil for 2011.
In three years, Penang has reduced its state deficit from RM630 million in 2009 to RM30 million in 2011. Selangor under Pakatan’s Abdul Khalid Ibrahim also saw an increase in state revenues from RM1.57 billion (2010) to RM1.634 billion (2011), as well as higher cash reserves.
But Pakatan does not seem to have spelled out the same prudent strategy when it included lower petrol, water and electricity prices in its manifesto. Pakatan also promised to abolish highway tolls.
How will they finance it?
“The real test is what you do when you are in power,” University Malaya’s Terence Gomez said.
Gomez however pointed out that corruption has diminished in the states where Pakatan has come into power and this lends some credibility.
Under Najib’s government, two main operational expenditures that grew fastest were supplies and services, and subsidies. Government data showed the former rose from RM23.8 billion in 2010 to RM32 billion in 2012. Subsidies nearly doubled from RM23.1 billion to RM42.4 billion.
In presenting the workings behind Pakatan’s manifesto, DAP’s Tony Pua said that it was these two components of government budget, which has unseen corruption, that Pakatan hoped to break into and draw from to finance its giveaways.
The subsidies would include government guaranteed profits to highway concessions, water concessions, lopsided power purchase agreements and operational inefficiencies.
Pakatan’s manifesto said it will introduce the parliamentary select committee system in crucial ministries such as finance, security, education, defence, Petronas and others in order to enhance the effectiveness of Parliament’s function to check and balance executive powers.
The BN Manifesto is quiet on devolution of power away from Najib.
Neither manifestos, not surprisingly, has much to say about taxes but economists said they expect either government to implement the goods and services tax to broaden the revenue base.
Most observers would agree that good governance is more a high-wire balancing act than political science. On that basis, it would be hard to judge from Pakatan or BN’s manifesto alone. BN has the upper hand because they have ruled Malaysia for 55 years and the system they have put in place obviously favours their return to power election after election.
But Pakatan, judging from their track record in running Penang and Selangor – two of Malaysia’s richest states – is impressively efficient and transparent. And looking at their manifesto, no one could really argue that Pakatan has not done their homework on the Malaysian economy.
And finally, defacto opposition leader Anwar Ibrahim was after all Malaysia’s finance minister from 1991 to 1997 during a time in which Malaysia last experienced a government budget surplus. Najib has only really been finance minister for four years from 2008-2012.
Tomorrow: The corruption factor
Yesterday: Coming down to everyday issues
You must be logged in to post a comment.