Disciplining an economy

IT IS official that the Malaysian federal government Budget 2023 will be tabled on Oct 7, 2022, three weeks earlier than the normal convention of the last Friday in October, every year. 

The market has been openly speculating that it will clear the path for the 15th General Election (GE15), mandated to run out by September 2023, ergo the expectation of another round of goodies to be dished out to the masses. It’s election year, so the rakyat is rightly expecting to be pampered with handouts and gifts.

As a teaser, the prime minister yesterday announced a one-off special financial assistance disbursement of RM700 and an additional RM100 on top of annual salary increment for civil servants from grade 11 to 56. Total financial implication is RM1.5 billion. 

With this across the board inclusiveness, the annual increment will not only cover the B40 (bottom 40% income group) and M40 (middle 40%), but part of the T20’s (top 20%) of the civil service, the top tier of Malaysia’s societal strata, as well.

It was neither related to any productivity bearing objective, nor was it due to any performance-related achievement. It’s as simple as that — as a relief, a gift. It is, after all, an election year, so the rakyat is rightly expecting to be indulged with handouts.

This exuberance of desperation to pamper the civil service and by proxy, the rakyat, is happening against the backdrop of Malaysia, for the 25th year running since 1998, will be experiencing yet another deficit budget.   

Succeeding a string of budget surpluses for most part of the 1990s — when Malaysia was considered among the Asian Economic Tigers — the consolidated public sector registered a modest budget deficit of 1.8% to GDP in 1998, reflecting an expansionary policy adjustment made to deal with the beginning of what was later remembered as the great currency crisis.

What follows, however, is rather unprecedented. For 24 straight years, despite the numerous cyclical downturns and upturns of the economy, the deficit rate has rather doggedly refuse to float to equilibrium, seemingly getting bigger almost every year, and making a quantum leap every election year,

This year, the deficit amount is expected to top 6.7% of GDP, equalling the record high of 2009 budget. 

Down the slippery slope: The perpetuality of deficits started 25 years ago, catering an expansionary policy in the aftermath of 1997 currency crisis

All of these happening while the government reserves is being burdened by a debt bill of over a thousand billion ringgit or to be exact, RM1.045 trillion. This debt, which value is 63.8% of the country’s GDP as at the end of June, has an eye watering debt-service payment cost of RM43.1 billion. 

As a measure of perspective, Petronas (Petroliam Nasional Bhd) yesterday announced it will be paying the government a huge dividend of RM50 billion (the national oil corporation paid RM54 billion in 2019, a record high of many measures from a single entity) this year. Factored against the federal government’s debt servicing cost, the majority of it however — RM43.1 billion or 86.2% — will go up in smoke meaninglessly, paying for the interest alone.

The ending of Barisan Nasional’s two-third majority in GE12, followed by the plutonic political shift of GE14 in 2018, has put paid to the world’s longest political monopoly. It has, however, exposed the nation to constituency mollycoddling, irrespective of the price to be paid by future generations. 

To the politicians, regardless of divide, the end justifies the means, always. The madness of politics gives them a myopic view that the opposing side must be deprived-of-power, at any cost, and kept-out-of-power, at any cost, and the best way to do it is to buy the hearts and minds of the constituents.

Take the Opposition-helmed government of 2018 for instance, instead of putting a complete stop to the idiosyncrasy of BR1M (1Malaysia People’s Aid) — which drained the federal coffers in excess of RM33 billion between 2012 and 2018 — begrudgingly opted to phase out the scheming policy instead. By merely renaming it Bantuan Sara Hidup in 2019, it still cost the federal coffers RM1.6 billion. 

Politicians are hopeless, as they are beholden to the constituents, therefore they cannot lead. The politics is severely corrupted and it will take more than one GE to purge out the decay. 

Where does this stop?

Colonisation was littered with tyranny, but it has also left us with systems and institutions, which, led by a truthful mind and hearts, would be able to rise above the noise and make the right although difficult, decisions. 

When the British departed, they left behind a working Westminster system, a democracy-based system which central workings involve the separation of power between the Parliament, the Executive and the Judiciary. As the most recent historic highest profile legal case suggests, the separation of power in this country does work after all. What seems to be needed for these national institutions is a courageous shot in the arm.

The bureaucrats of the Treasury and of the financial authorities should take cognisance that apart from the judiciary, there are various courageous supporting institutions who could claim credit in the incarceration of the sixth prime minister, ie the central bank, the Attorney General Chambers, the graft agency.

In the event when political consideration seems to outweigh the founding common sense, decisions must be questioned. Don’t be afraid to point out that any plan to spend funds needs to be supplemented with some plans to acquire funds or generate wealth.  

Debates, healthy debates, need to be held at every level. Speak up at every occasion available — be it at the drafting committee, the consultation committee, or the presentation committee. 

Be reminded that any failure to be part of the systemic check and balance could quickly erode our economic heritage, and the actual cost would need to be borne by our children, the future generation. 

In conjunction of this 65th Merdeka Anniversary, let us take responsibility to do the right thing. Let’s indoctrinate the right and proper morality. Buying votes is simply wrong, period. Regardless of the economic strata, Malaysia must be returned onto the right track of economic sustainability and a favourable fiscal position. We cannot afford to lag behind anymore, as any further shift would leave Malaysia irrelevant at the regional forum.

Asuki Abas is The Editor of The Malaysian Reserve.