Mini Budget: Stimulating the Rakyat

A Kadir Jasin

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IN the continuing series of kopitiam discussion with several veteran politicians, lawyers and economists, I would like to talk about the mini budget presented on March 10 by the Deputy Prime Minister and Minister of Finance, Mohd Najib Abdul Razak.

My apologies to the readers for taking a long time to comment on this very important issue, in particular to debater Sawit Futures Trader, who had insisted that I gave my two-sen worth of views.

I had taken a long time because being out of the information loop, I have no firsthand information about the budget until it was presented. Furthermore, on this particular issue and instance, I thought I better sought the wise words of the “oracle”.

In gist, this is what the kopitiam veterans, the economists and the “oracle” have to say about the mini budget.

It did not matter much what the analysts and bloggers said. Nor the fact that the Oppositions were not stimulated by it.

What is most important is for rakyat to be stimulated. The stimulus package is for them. If the benefits go to them, they will be happy. The government has taken care of their needs. So let us wait a while and see.

The amount in the two packages is RM67 billion. This is bigger than Singapore’s S$20 billion. So it should be as we are a bigger nation. In the per capita term, however, it’s still smaller that Singapore’s package.

The comments by those who showed interest seem to suggest that in preparing the mini budget, the players were not consulted.

If this is true, getting the stimulus packages running would be harder. If the government wants private sector to create 100,000 jobs, as was stated, which companies is it targeting?

The “oracle” said, in the case of the last two crises – mid-1980’s and the 1997/98 – the government was very clear about who should get the money and who should create jobs.

In the crisis of the mid-1980’s the government gave money and directed government departments to employ the unemployed directly to do such jobs as cleaning drains, irrigation canals and rivers.

The “oracle” said RM10-15 a day to unemployed urban workers and rural farmers was a lot of money at the time when they were in financial hardship.

He noted that during the late Tun Abdul Razak’s time, a “green book” was issued to encourage farmers to produce more food and for the households to plant vegetables around the house.

So, the “oracle” asked, were the large companies and employers called in and told to create the jobs? Were they taken into confidence and if so, did they agree? Otherwise how do you arrive at this projection?

The “oracle” also recalled how during the crisis of the mid-1980's, when the economic and finance matters were transferred from Tengku Razaliegh Hamzah to Tun Daim Zainuddin, the government successfully encouraged the private sector to supplement the government’s Unemployed Graduate Scheme with their own programmes.

(I was then in the New Straits Times and we launched a scheme that we called the Pre-Entry Training Scheme (PETS). In continued until a few years ago. Hundred of fresh graduates and school-leavers were trained and many of them today hold important posts in the mass media.)

Some commentators said the government finally acknowledged the severity of the crisis while a handful of official annoyingly continues to make excuses.
As recently as Jan. 14, two months after the 1st stimulus package was launched, the 2nd Minister of Finance, Nor Mohamed Yackop, continued to insist that “3.5% growth for 2008 achievable.”

He was in a state of denial, and worse, Mohd Najib repeated this optimism believing in what the MOF2 had been telling the Press. It must have come as a shock to DPM to realise that he had been misinformed of the situation.

Tun Dr Mahathir Mohamad had earlier written in his blog that he could not believe the crisis was not affecting the country, as we are a trading nation.

How then could MOF2 told us to believe that Malaysia is immune?

Under the stimulus packages, the government will directly allocate RM15 billion over two years -- RM10 billion this year and RM5 billion next year. Anything above this will increase the deficit to an unacceptable level.

The budget deficit this year is expected to rise to RM7.6 billion from last year’s RM4.8 billion.

To get round this, government decided to give guarantee to create an additional amount of RM25 billion. Another RM10 billion will be equity investment, RM7 billion private investment initiative and RM3 billion in tax incentives.

Would it not be better for the government to encourage the banks to lend more? They are supposed to be hoarding over RM200 billion.

Why are they keeping the cash when the country is facing the most serious crisis in history and is in need of capital?

Or is it because our banks have been investing overseas? Only Bank Negara knows. Investors want access to funs and not so much cheap funds. Of course cheap funds help to attract more investors.

Bank Negara must ensure not only accessibility to funds but attend to complaints from borrowers that banks are “corrupt” and are putting bureaucratic barriers.

Normally, operational expenditure is around 30 per cent. But this time it is 50 per cent. The government must explain this large increase.

The Government says it wants the Oppositions to work with it to overcome this crisis, forget politics and but put country first. The response from Opposition “Yes we will work with you but let’s have election in Perak.”

So much for working together. So much for country first. What has the election in Perak got to do with the global economy?

Clearly the Oppositions too are making excuses because they too don’t know much about the economy. Their de facto chief, Anwar Ibrahim, could no longer call on the IMF for help because the IMF has failed and the global financial system has melted.

What is most important in the implementation of the Mini Budget is for government to deliver the promises it made to the people quickly and without wastage, irrespective who they are affected by this crisis. No politics here.

Mohd Najib has to learn a lesson from this crisis. He has to have good advisors and implementers. There should not be a repeat of the MOF2 who was famously quoted by the Press saying: “Tidak sangka keadaan ekonomi menjadi buruk.” (Had not thought that the economy would become this bad.)

Others had warned the government but were ignored. Because of his “tidak sangka” stance, all Malaysians suffer.

Reports say Khazanah lost billions too. And government “was happy” that the losses were not as bad in Bursa Malaysia (KLSE) in comparison to China, India and other emerging markets.

What a consolation! Have we not been told that Khazanah is being run by so called brilliant “Oxbridge” boys hand-picked by the Prime Minister himself?

Are they continuing to pay themselves fat bonuses like the AIG executives in spite of the Khazanah and the GLC’s major losses?

The value of Khazanah’s investment declined to RM70.4billion on Dec. 31, 2008 against RM88.2 billion on May 31, 2008. The net worth (realizable asset value less total liabilities) fell from RM53.1 billion to RM33.7 billion.

And in both stimulus packages, money was given to invest in shares. Is this the time to buy shares? Like BN’s loss, these are paper loss too!

But when borrower pledge their shares to banks, prices drop and banks call for margins. Are these not paper loss too? We can’t have people with the “tidak sangka” mindset to be in charge of our economy.

And now talking to bankers after country is really down when should have done it earlier soon after the 1st stimulus.

We are always late.

Those who run our country must be alert. No sleeping on the job. No flip-flop. Most of all no “tak sangka”.