Global Economic Forecast
The global economy in 2014 is forecast to increase from 2013. IMF forecasts (4.0% vs 3.3%), the World Bank (3.0% vs 2.2%) and OECD (4.0% vs 3.1%).
However, the reality is that the global economy which is rather fragile and is uncertain at this point (as will be described below) can bring about risks on the forecast above to change to a lower rate;
i. Uncertainty in the solution of the US debt problem (debt calling, quantitative easing)
ii. Economic recession and continued high unemployment rates in Europe due to austerity measures
iii. China’s lackluster economic performance and the slow recovery of the Indian economy
Pakatan Rakyat forecasts that the economic growth in Malaysia for year 2014 will be at 5.2% (compared to 2013 at 4.5% to 5%) based on the forecast of global economic growth.
Deficit Estimates
Pakatan Rakyat estimates the national deficit for 2014 to be at RM34 billion, equivalent to 3.2% of the GDP (Gross Domestic Product). This estimate is based on:
i. Estimated National revenue of RM228 billion
ii. Estimated National expenditure of RM262 billion, after factoring in a 10% fall in operating expenditure excluding emoluments
iii. Estimated GDP of RM1,055 billion based on projected growth of 5.2% for 2014
Since Pakatan Rakyat provided an alternative Budget, PR’s deficits are often lower than BN’s. BN’s actual deficit can be estimated to be higher than 3.2% (estimated at 3.8% to 4%) due to their failure in tackling corruption and leakages.
Core of Pakatan Rakyat’s (PR) Budget
This time, PR’s Budget is designed based on three key themes:
a) Strengthening the National Fiscal Position and Public Financial Empowerment
b) Balanced, Inclusive and Sustainable Economic Development
c) Increase in the People’s Wellbeing and Quality of Life
1st Theme: Strengthening the National Fiscal Position and Public Financial Empowerment
Strengthening the National fiscal position is very important in ensuring continuity of the National credit rating which is now facing the possibility of sovereign downgrade due to the increase in deficit and national debt which has been festering since 2009.
PR’s alternative Budget 2014 is an effort to introduce fiscal reforms that will ensure the achievement of the budget deficit at 3% of the GDP by 2015 and to then achieve a budget surplus, latest by 2018. This fiscal reform is expected to enable Malaysia to:
i) Climb out of debt which is now estimated to be above RM500 billion with costs of servicing the debt exceeding RM20 billion each year
ii) Ensure that our economy becomes more resilient to face the global environment which is becoming more challenging and uncertain
iii) Move away from an economic growth from one that is dependent of borrowing to one that is driven by genuine government pump-priming
To ensure a more efficient and orderly government EXPENDITURE, PR will:
a) Launch a rationalisation of cost in every ministry and government to achieve a reduction in operating expenses by 10%. This will be achieved through;
i. A temporary delay in the increase of allowance of cabinet members and heads of government departments
ii. Reviewing of government spending policies, particularly in the awarding of contracts and equipment procurement
iii. Streamlining targeted subsidy mechanism and also the control of subsidised goods such as diesel, petrol, sugar and flour to prevent misuse of subsidies
b) To review spending priorities by reducing or eliminating spending for ineffective and less important programmes such as;
i. The National Service programme which is seen to have failed to achieve its objective of fostering racial unity and identity among trainees. The programme costs RM800 million annually, which is greater that the expenditure by the Ministry of Youth and Sports (RM700 million), which also has the same goals.
This programme has resulted in a total of 22 deaths since its inception and there were cases of female trainees giving birth during the programme, dues to bad planning and implementation of the programme. This programme should be deferred until a comprehensive study is conducted by the Parliamentary Select Committee (PSC).
c) Take decisive action against all ministries involved in any wrongdoing and wastage, as reported in the Auditor-General’s Annual Report. PR estimates that at least RM20 to RM30 billion can be saved if all wasteages and fraud reported are stopped. Some examples of great wastage reported are;
i. RM2.051 billion spent from 2010 to 2012 from a total amount of RM3.689 billion allocated to the Ministry of Education to pay unarmed guards to guard schools and educational institutions.
While the intent is indeed noble, the lack of monitoring has allowed over-aged, non-security vetted personnel and non-functioning CCTV’s to be trusted as means of keeping our children safe in schools. Waste is estimated at RM1.6 billion.
ii. The Mansuh project management by the Ministry of Public Works. From 2010 to 2012, in the Mansuh project, the 83 projects were estimated to amount to RM2.2 billion. Losses estimated at RM1.1 billion or 50% from the original value due to weak project monitoring and failure to recover payment from contractors.
iii. The Ministry of Transport spent almost RM 1.42 billion from an already revised allocation of RM 1.47 billion to upgrade the Kota Kinabalu International Airport.
Despite spending over 96% of a revised allocation, this project initiated since 2006 is far from completion with arrival halls and passenger toilets in unsatisfactory condition, 599 potholes were found on the runway and taxiway since 2010, which are not yet repaired.
Estimated losses reported so far is around RM120 million. It is most likely that this project will cost much more to complete.
B. To generate a more equitable and fair government INCOME, PR will:
1. Postpone the implementation of the GST (which is seen to more of a burden to the low and middle income group) until:
i. The minimum household income reaches a level deemed appropriate to absorb any impact on purchasing power due to the GST
ii. Widening the income tax ‘band’, especially for the middle class to prevent their entry into the ‘band’ of higher taxes in a short term. More tax exemptions should be given to the middle class.
iii. Comprehensive study of the corporate/individual trade-off tax with the GST will be conducted and explained to the public to avoid from the people being burdened by an increase in tax due to the GST if corporate/individual tax is maintained at the same rate.
2. Introduce a more equitable tax system;
i. Bringing back the RPGT (real property tax gains) to pre-2007 levels, where the rate is 30% for sales within the first year and the lowest rate is fixed at 5% for sales in the fifth year. This is to more effectively curb speculation activities.
D. Other aspects of the PR 2014 Budget
1. PR believes that increasing connectivity, be it in terms of communication such as the Internet, or physical connection like highways, are essential to ensure a more balanced, sustainable and inclusive economic growth. To achieve balance in terms of development of people from rural/urban Sabah & Sarawak;
i. The Pan-Borneo highway connecting cities in Sabah & Sarawak will be upgraded and its construction will be accelerated to early 2014. Accident locations will be identified to be repaired, and periodic maintenance will be performed.
ii. Reviewing the cabotage policy imposed on Sabah & Sarawak. A better policy would be able to reduce the price of cargo and goods that enter/exit Sabah and Sarawak, thus contributing to economic growth.
iii. Ensuring 100% water and electricity supply for rural and urban areas, especially in Sabah & Sarawak. This is to ensure clean water supply and electricity through the use of solar technology, windfarms and microhydra.
2. PR greatly appreciates contribution of women in National development. Women will be given the following incentives to encourage them to continue to contribute to the National economy:
i. An allocation of RM1,200 per annum for every working mother to finance child care services for children below 12 years.
ii. An allocation of RM3 billion a year for the National Women’s Contribution Scheme (SCWN), in the form of a comprehensive social safety net for wives, especially housewives.
The PR Government will contribute RM600 per year, regardless of the level contribution of the husband (husbands contribute a minimum of RM120 to RM1,200 per year on behalf of their wives) and SCWN can be withdrawn upon the death of their spouse, divorce, permanent disability and permanent loss of income.
iii. Maintaining policies to increase women’s leadership to at least 30% in 2017. Women’s leadership in Parliament, corporate management and national leadership in the public and private sector will be the main focus.
Dato’ Seri Anwar Ibrahim
Malaysian Parliamentary Opposition Leader
Parti Keadilan Rakyat
