Will it change anything..?

MALAYSIA 2009 BUDGET REVIEW

by Yusof Nor, UIA

Malaysia 2009 Budget, announced by the Prime Minister of Malaysia on the 29^th of August 2008, is themed A Caring Government (Kerajaan Prihatin). It stressed on three major spots; ensuring the well being of all Malaysians, developing quality human capital, and strengthening the nation’s resilience. The new budget stands at RM207.9 billion which constitute operating expenditure of RM154.17 billion (74.1%) and development expenditure of RM53.73 billion (25.9%). The expansionary budget taken by the government theoretically is necessary in generating or keeping the country’s growth pace, since the economy is facing weaknesses in two major components of domestic demand- private consumption and investment. And since the government is facing a siege from the political side, government intervention and spending is necessary according to the Keynesians to offset the downward step of the economy, otherwise it will exacerbate more problems in the economy, creating more unemployment, which will be back fired the already unpopular government. Still question arises as how much deficit is necessary to stimulate the economy? Can the deficit be off-set as planned? Or will the government face further fiscal crisis?

The steps that the government has taken do somehow in my opinion help to reduce the burden of the majority, but for how long? How long does the economy need to be dependent on the government’s boost? Malaysia has experience budget deficit for years since the 1998 recession. Deficit means more borrowing is being done for the future generations to pay. Dependent on the oil revenue also has increased from 37% on the previous budget to 46.4% of the total budget announced. This is a worrying trend since the oil reserve is expected to deplete in a decade or so. Furthermore the increase in the dependent of oil revenue shows that the economy is not growing as it supposed to, as what had been publicized widely by the media. Other risk is that the projected deficit of 3.6%, reduced from 4.8% this year might not be happening, should the oil price continue to decrease as it will hurt the revenue. United States, Europe and Japan are facing a slowdown in the economy, therefore with the current world economy situation, and should it not improved, the oil price will continue to fall. Critics are skeptical that Malaysia might not be able to reach the target, and it will hurt the ringgit and rating at risk. Already Standard and Poor’s cut its outlook on Malaysia to ‘stable’ from ‘positive’ on its ratings.

Does the budget 2009 address the socio-economic inequality that worsens before is questionable. Proportional tax deductions applied in the budget benefits both the rich and the poor. Given the fact this shows that lower and middle income are better off, but the higher level is better off even more. Inflation is another factor that must be watched carefully. The fact that the people will spend cautiously will give possible price increase. The government needs to take note and be concern to curb the inflation by implementing policies and strict enforcements.

One important factor that seems the government had failed is in the implementation and enforcement. For years the audit has revealed imprudent spending by the government agencies. This need to be monitored to ensure that the people’s money being spends and went to the right purposes. The target groups mentioned in the budget need to be monitored to guarantee that they do actually receive the aids cited from the budget. Beware of corruptions and misuse of the government spendings.

Finally, the obscure of the skeptics, pessimism and cynics need to be dealt accordingly to instill the confidence of the people to the government. There’s a saying of the wise that skeptical and pessimistic happens when democracy fails. Transparency, accountability and governance issues that have been the concerns and being discussed for so long by the people need proactive dealings by the government to rein in the economic confidence predicament towards them. To end the pessimism, the economy needs to be make sure to be fair and just and not favoured towards the elites and insiders who gain wealth through “short cuts” from the government.