Monday October 8, 2012
Looking beyond the general elections
Transformation Blues - By Idris Jala
The budget supports the move towards growth and high income while remaining fiscally prudent
WHEN the Prime Minister announced the Budget 2013, many people applauded it but as expected there were critics who sung the budget blues.
According to common wisdom, national budgets ahead of an election tend to be overly generous, reckless even, to hand out goodies left, right and centre to entice people to vote for the incumbents.
A careful look at the recent budget shows that it is certainly not reckless. It did not promise the moon and the stars.
Of course, there are rakyat-centric elements in the budget. Then again, which government in the world does not incorporate those?
Despite elections looming around the corner, the budget is pragmatic, eminently doable and does not go overboard in terms of generosity. That is as it should be.
There are three things that I like about the budget:
This is spearheaded by private investment and domestic consumption, which are anticipated to rise by 13.3% and 5.7% respectively.
By this measure, we have a programme to reduce the deficit to 3% of GDP by 2015.
We are steadily moving towards that with the deficit projected to go down to 4% of GDP in 2013 from 4.5% in 2012.
This represents a continuing decline from 6.6% in 2009, 5.6% in 2010 and 4.8% in 2011, reflecting a major promise to fiscal prudence being fulfilled.
Let me expand on the points. In terms of economic growth, we are very happy to note that we got all the allocations we asked for in terms of achieving the economic and Government Transformation Programme.
We asked for exactly what we wanted we did not ask for more and we got that. It's about RM8.4bil in all. Lest I be misunderstood, no, this is not Pemandu's (the Performance Management and Delivery Unit) operating budget. It is implementation of government projects to support growth, development and change across all sectors as part of transformation.
For instance, we need infrastructure if the multi-billion-ringgit Pengerang oil and gas project is to proceed.
That will enable us to do everything that we have targeted to do in 2013 to stay on track to become a developed country with high income by 2020. The budget is very supportive of the transformation programme and its path and is committed to pushing it strongly forward.
In terms of stimulating the economy and giving it a Keynesian fillip at a time when growth is on the wane in all parts of the world, the 1% point cut in income tax in some segments provides some additional disposable income as will the 1 months bonus for civil servants.
The affordable housing programme aims to provide land so that developers will be able to build nice homes for those in the middle-income group.
That will help boost the construction and ancillary industries while alleviating a serious social problem.
As it has been always, a large chunk of the budget went into education where the Government has unveiled a comprehensive blueprint for the holistic development of the sector.
On subsidies, it has declared its intention by cutting those on sugar, albeit by a small amount, which can be easily made up for by everyone cutting consumption of sugar in their food instead of increasing prices.
The mamak can simply reduce the amount of sugar in his teh tarik by a fifth instead of increasing prices. That also means we don't have to tell him “kurang, kurang manis” when even “kurang manis” is too much sugar.
Prudence has not been a casualty in this basically expansionary budget and the Prime Minister has also made his intention clear to keep federal debt to under 55% of GDP.
One should also note that most of the government borrowing is domestic, so we won't have foreign banks knocking on our doors in the dead of night.
The best way to provide jobs is to keep the economy growing to increase incomes. But until we reach high income for most, there will be many pockets of poor. The transformation programme addresses this.
But in the interim, direct hand-outs to the poor provide immediate relief and succour to them and should not be belittled. Their effect is significant and helps to lift them out of the abject poverty they live in. Such targeted help must be lauded.
Always, it is important to look at the budget in totality. It is not realistic to expect new, pleasant surprises all the time. Much of the measures may be boringly consistent as indeed they should be to ensure some permanence and predictability of economic policy making.
The important thing is the thrust of the budget. It supports economic growth and the strategic reforms necessary to achieve high income and development.
It is prudent and delivering on the promise to cut the budget deficit in terms of the GDP. It has specifically targeted those who need help.
What more do you want from this budget?