SEPT 30 — Even though many goodies where announced during yesterday’s Budget 2013 speech by Prime Minister Najib Tun Razak, this budget has failed the Malaysian people by not addressing three crucial areas which are necessary to guarantee the long term well-being of our country and its people — namely fiscal prudence, economic sustainability and cost of living increases.
Firstly, even though the budget deficit is projected to come down
from 4.5 per cent in 2012 to a ‘mere’ 4.0 per cent in 2013, this figure
masks the poor track record of the BN government in sticking to its
For example, total expenditure for Budget 2012 was announced at
RM232.8 billion in last’s year’s budget speech. But in this year’s
Economic Report 2012 / 2013, total expenditure for 2012 is projected to
total up to RM252.4b.
This is almost RM20b more than the projected expenditure announced
last year. We were fortunate that projected revenue is expected to be
RM207 billion for 2012, RM20 billion more than the RM186.9 bilion
projected revenue announced last year. Without this tax ‘windfall’, our
budget deficit would have ballooned up to 6.7 per cent of GDP rather
than the projected 4.5 per cent for 2012.
But we cannot expect that actual revenue will continue to exceed
projected revenue especially given the slowing global economy.
Furthermore revenue from oil related tax revenue is likely to decrease
given the change in the dividend policy of Petronas as well as political
uncertainty in Southern Sudan which could decrease Petronas’s bottom
line by as much as US1 billion.
While we do not object to giving financial assistance to the truly
deserving, there is nothing to indicate that the government has stopped
leakages in the BR1M program which went to people like an MCA Datuk in
The initial RM1.8 billion that was allocated to BR1M for 3.4m
households in the 2012 budget ballooned to over RM2 billion for over 4
million households. A country whose GDP is projected to expand by 5 per
cent in 2012 should see fewer households earning less than 3000RM. And
yet, BR1M recipients are projected to increase to 4.3 million households
with another 2.7m individuals earning less than 2000RM joining them.
Without proper checks and balances, the RM3b that has been allocated
to BR1M 2.0 for Budget 2013 can easily increase to more than RM4b, if
not more. The same lack of fiscal prudence could be seen in the
expenditure on subsidies.
An allocation of RM32.8 billion was given for subsidies in Budget
2012 but the actual expenditure on subsidies is projected to be at
RM42.4 billion, an increase of RM9.6 billion or 29.3 per cent over the
original budget! If the same kind of trajectory is followed, the RM37.6
billion which is allocated for subsidies in Budget 2013 could easily
increase to almost RM50 billion!
Given the BN’s poor record for fiscal prudence and especially if
elections are held next year, it is likely that BN will break the bank
to funnel out as much taxpayer’s money as possible in a blatant attempt
to buy votes by giving handouts irresponsibly. I would not be surprised
if our total expenditure will be RM30 billion over budget and our budget
deficit for 2013 would end up well in excess of 5.0 per cent!
Secondly, this budget provides incentives and handouts which favours
certain projects and parties rather than providing the basis for longer
term sustainable economic growth that will benefit all.
In fact, many of these incentives will skew the system against
hardworking Malaysian entrepreneurs who are not in the position to
receive and benefit from these incentives.
For example, Budget 2013 continues to give preferred incentives and
tax treatments for companies who want to locate to and developers who
want to build in the Tun Razak Exchange formerly known as the Kuala
Lumpur International Financial District (KLIFD) including tax exemptions
for property developers, income tax exemption for 10 years for
TRX-status companies, stamp duty exemptions, industrial building
allowance and accelerated capital allowances for TRX Marquee-status
The aggressive promotion of TRX not only increases the problem of a
property glut in commercial office space in Kuala Lumpur, it also
unfairly disadvantages developers who own and are in the process of
developing commercial property which TRX is directly competing against.
These developers would lose out if existing or future tenants decide
to relocate to TRX and at the same time, the taxpayer would also lose
out since these companies would be given income tax exemption for 10
As part of this initiative, 1MDB will be allocated an additional
RM400m from the Prime Minister’s Department in Budget 2013, an
unnecessary expenditure for what is essentially a property development
Similarly, under the guise of lowering prices of goods in Sabah and
Sarawak, the government is introducing 57 Kedai Rakyat 1Malaysia or KR1M
stores at the cost of RM386 million. Just like in Peninsular Malaysia,
the ones who will be hurt by this move are the owners of the kedai
runcit stores who cannot compete against the government subsidized KR1M
It would make more sense for the government to abolish the cabotage
policy and to improve the transportation network in Sabah and Sarawak to
reduce prices of goods in Sabah and Sarawak, which is what Pakatan is
proposing, rather than to subsidize KR1M stores that are run by one
private company which would drive out many existing kedai runcit owners
out of business.
These kinds of initiatives contradict PM Najib’s statement that the
era of ‘government knows best is over’. Indeed, according to the
Economic Report 2012 / 2013, the public sector is expected to expand by
13.3 per cent in 2012 to account for 25.2 per cent of GDP (up from 23.3
per cent in 2011), meaning that the government will play a larger role
in the economy, rather than to reduce its footprint and to allow the
private sector to thrive and drive the economy forward.
By promoting and undertaking these initiatives, Najib is
contradicting one of the major thrust of the New Economic Model (NEM)
and also the impetus behind the Economic Transformation Program (ETP).
Thirdly, this budget fails to bring to the table long term solutions for
the problem of rising cost of living, especially in the urban areas.
Crime is one of the main drivers of cost of living increases.
Businesses which have to spend more on security pass the costs to
consumers. Residents who have to pay for private security have less
Sadly, the measures which are in Budget 2013 to reduce crime leave
much to be desired. There are no recommendations to re-organize the
police force by re-allocating Special Branch officers, which have twice
as many investigating officers / detectives as the Criminal
Investigation Department (CID), or by re-allocating some of the 14,000
General Operations Force (GOF) police personnel, an organizational
legacy from the Communist fighting days, to the CID and the frontlines
of fighting crime.
Instead, what was provided was the allocation of RM20m to buy 1000
motorcycles at a cost of RM20,000 per motorcycle to set up a Motorcycle
Patrolling Unit. In addition, there were hardly any efforts proposed to
involve the state and local authorities to fight crime.
All that was mentioned as the allocation to buy 496 units of CCTVs
for 25 local authorities to prevent street crimes in urban areas. This
works out to 20 units of CCTVs for every local authority which is not
even sufficient to cover one neighbourhood, much less the area in one
Similarly, the ambitious program to build more than 100,000
affordable and low cost houses will come to naught if these housing
projects are not integrated with public transportation. The MRT project
and the LRT extension cannot possibly cover all the areas which have or
will have low cost and affordable homes, assuming that they even get
Allowing the state and local authorities to provide bus services
would be one possible solution to this problem. But instead of this, the
federal government is expanding the federally owned RAPID bus services
to other places, this time to Kuantan.
With car prices still at very unaffordable levels, especially for the
lower middle income groups, the issue of affordable and low cost
housing cannot be seen in isolation from the issue of public
Unfortunately, PM Najib does not seem to have realized this as seen
by his Budget 2013. Pakatan Rakyat’s budget, on the other hand,
exercises much more fiscal prudence. Not only is our projected deficit
lower at 3.5 per cent of GDP or approximately RM37 billion, our revenue
and expenditure projections are also much more conservative, at RM197
billion and RM234 billion respectively.
A more conservative budget would give us more room to maneuver if
Pakatan does take over power at the federal level and puts its budget in
place. PR’s budget is also more economically sustainable in that we do
not attempt to favor one sector or project over another. Instead we will
set out to abo
Our budget also gives more focus on long term solutions to address
cost of living issues including a proper redeployment and reallocation
of police personnel to fight crime, more involvement of local
authorities to reduce crime and provide public transportation
alternatives, reduce and abolish toll rates to put money back into the
pockets of the people and to find new ways of providing affordable
The choice for Malaysians is very clear. Najib’s 2013 budget is full
of one shot goodies and handouts which do not adequately address the
long term concerns of the country namely fiscal prudence, economic
sustainability and cost of living increases.
Pakatan, through its Alternative Budget, and through the state
governments in Penang and Selangor, have shown that it can govern with
fiscal responsibility in mind, with sustainable policies which encourage
fair competition and with measures that puts money in the pockets of
the people in the long term. Let the people of Malaysia choose wisely.
* Lim Guan Eng is Penang Chief Minister, MP for Bagan and DAP secretary-general.
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