Tuesday 21 August 2012

Dark look at the country’s financial situation - Tracia Yeoh

In the lead up to the 13th General Election, economic issues will inevitably be hotly debated by all sides of the political divide. It is within this context that a book of great relevance to Malaysian readers and voters has been recently published.

“UMNO-nomics: The Dark Side of the Budget” is a concise analysis by Teh Chi-Chang on the national budget and the various issues facing the country’s public finances.

Illustrated by Johnny Ong, it also provides for entertaining reference through accompanying cartoons. 
I personally read the book in a single sitting, because it touched on subjects I am particularly interested in. 

Although many scandals and controversies are reported in Malaysia, rarely are they examined in light of the bigger picture: the country’s dire financial situation and public administration. 

These sometimes complex issues are written in a style that is easy to read and understand, making sense of terms such as revenues, expenditures, debt, subsidies, disposable income and resource management – that eventually connect the dots to present the whole of what is often perceived as a fragmented story. 

And it is this whole that is the most worrying of all – what ran through my mind whilst reading it was, is this truly the situation our country faces? 

For example, the author brings us through the reality of the national debt, using well-referenced figures to show that if we were to include contingent liabilities in the calculation, our real national debt is actually as high as RM573 billion, or “nearly RM20,000 for each and every one of us”, which would constitute 67 per cent of our GDP. 

This far surpasses the 55 per cent federal government loan limit as defined by our national laws.

Second, some disturbing figures are also revealed, where only 1.7 million Malaysians pay taxes, which contributes only RM20 billion, or 11 per cent of total government revenue. 

Teh argues that if the government were more prudent and efficient, it may be able to save even more than the total income taxes currently contributed by Malaysians. 

His central argument is therefore that the country has been inefficient in its expenditure through a number of ways (blanket subsidies, centralised government, over-reliance on oil revenues). 

Of course, given such a bleak analysis, surely urgent solutions must be equally sought to resolve this, one imagines. 

Without going into too much detail, some policy proposals include raising household incomes, implementing open tenders, cutting the cost of living and streamlining the civil service. 

The book makes no attempt at hiding its agenda – it very clearly presents alternative solutions by the opposition coalition Pakatan Rakyat. 

Given this, readers might easily dismiss its contents as being biased and shadowed by an entirely political flavour. 

And it is true, there are sections which promote the two Pakatan-led states of Penang and Selangor based on case studies that succeeded there. 

Further, it is published by Research for Social Advancement (REFSA) that is now known for its series of hard-hitting pieces against the government organisation, the Performance Management and Delivery Unit (PEMANDU). 

Nevertheless, read with an open and analytical mind, a reasonable Malaysian would grow increasingly concerned at the government’s structural problems. 

The book reminds us that if we are concerned about the future of the country, along with the next generations to follow, serious planning and systemic reform need to be done. 

Great thought, for example, must be given to addressing long-term policies of subsidies, minimum wage, oil and gas, procurement, and the centralisation of government. 

One immediate proposed change is that the prime minister (akin to a company’s chief executive officer) should not assume the same position as that of finance minister (akin to a company’s chief financial officer). In a corporation, the separation of functions and responsibilities of the CEO and CFO ensure good governance, and stringent checks and balances. 

Finally, it challenges us to consider the economic model that is currently being pursued by the government. 

The huge government presence in the economy through government-linked companies (GLCs) has slowly driven out ordinary small businesses, resulting in “massive shrinkage of private investments in Malaysia”. 

This is a startling admission that despite government’s efforts to promote the private sector, it contradicts itself by allowing government-owned companies to compete with the private sector. 

These teasers provoke us to pause and consider the tremendous amount of public sector reform that will be needed in the immediate future. Political polemics aside, leaders from both Barisan Nasional and Pakatan Rakyat would do well to make this book bedtime reading. Sometimes, an acute awareness of present problems is needed, to present the answers that are now so desperately needed by ordinary citizens.

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