12 June 2010



osmah's Man (RM), aka Datuk Seri Najib Razak, has recently announced the 10th Malaysia Plan, Rancangan Malaysia Ke-10 (RMK10) that will cost the country's tax payers Ringgit Malaysia 230 billion (RM230B). One must look at this objectively whether the country's wealth will be spent wisely for the benefit of the nation as a whole.

"With RM230 billion at stake, we must be careful to ensure that the projects are carried out with full accountability and transparency" - Tan Sri Lee Lam Thye in NST on 11 June 2010

Tan Sri Lee's statement above is really what the mainstream Malaysia is thinking. What goes on behind the scene and what is truly the reality often does not translate into information worthy of being considered by the citizens. What matters most in the eyes of fellow Malaysians are perceptions. Regardless of authenticity of facts or whether certain messages are propaganda or the truth, at the end of the day, perception wins. Therefore, it is useless trying to argue with the public. Instead, any misinterpretation by the public is the product of miscommunication by the politicians. Hence, misinterpretations ought to be responded by clarification.

So what is the public's perception of RMK10? It was highlighted on a front page of NST that the RM230 billion will be mostly spent on Economy (RM126 billion), followed by Social (RM69 billion), then Security (RM23 billion) and Administration (RM12 billion). The last 2 items, Security and Administration, is vague and confuses people. The public will or has, immediately jump to conclusion to say "Why on Earth are we wasting that much money on administrative matters and worse still, on security? Are we buying more submarines and upgrading police's cars to Lamborghini?" You see what I mean when I said perception wins? Whatever is in "Security" and "Administration" really should have been reclassified into Social and Economy and then broken down to show key areas of interest. That should have been the front page!

Also, it was highlighted that the key goals include achieving Per Capita Income of RM38,850 per annum. This is a mere RM3,000 plus per month, which is really, when benchmarked globally, is around USD1,000. In my mind (and most people's minds), although purchasing power ought to be considered, USD1,000 is very low. Weekly groceries including petrol for a Kancil can easily take up RM500 and the remaining RM500 goes to rental. Wallah! that is what we, sarcastic Malaysians, call "Kais Pagi Makan Pagi" (Digging in the morning just for breakfast - in a context of a chicken digging the ground) and then, no more kais (digging) available. So the perception is, our Per Capita target is pathetic, let alone the actual Per Capita as we speak. If that is the case, I am amused by the talk on Middle-Income trap whereas I should have been bemused by a talk that stresses Low-Income trap.

Najib has shown good attributes so far with fantastic plans in his RMK10, NEM, NKRA, 1Malaysia and what not; but he ain't got enought time if these plans are not rolled out in time to produce results - we don't want to call him Bapa Slogan (Father of Slogans) when he retires. I suggest he seriously continue his father's foot steps of abolishing poverty. What is poverty back then is different today. Efforts to eradicate poverty has to be a continuous one. Targeting Per Capita of RM38,850 is a start but it looks disjointed when the plans at hand are talking about higher income urban-type human capital initiatives. Again I'd like to remind readers that this is a perception and it may not be true, but truth does not matter. Perception wins.

Back to RMK10 - we are still on a front page of NST without even reading the content of the paragraphs. You see statements such as "6% growth 'possible'". A target should be at a higher level for the sake of value-add and improvement. 6% growth 'possible'? What do you mean 'possible'? Didn't Malaysia achieved such growth level in the past and in fact, if memory serves me right, we may have even achieved higher growth than that. Just recently in the first quarter of the 2010 year, it was reported that the GDP growth stood at 10.1%. So we are targeting 6% for full year 2010 when we are already at 10.1% in the first quarter. Of course an economist, an accountant, the few educated people that we have, knows that 6% for the full year takes into account the averaging effect and that 10.1% is a temporary high growth knee-jerk reaction as the nation recovers from the horrible recession in 2009. But for a Jo-Bloke on the street, it would have been better if we had said "To maintain sustainable GDP growth rate at 6%"

I must admit that there are some strong pointers that invite readers to know more, such as "Call for fair wages", "52 public-private high-impact projects" and "New body to spearhead Bumi agenda". The last one in particular, is an issue close to 70% of the hearts in the country and to ignore it completely would have been a disaster - even a non-Bumi would agree. So thumbs up for that.

Federal Government Accounts for the last 10 years showed gradual increase in revenue coupled with gradual increase in expenditure as well. The only issue is the deficits whereby revenue is lower than the expenditure. From an economist point of view, budget deficit is acceptable in the name of "boosting economy" but from an accountant's point of view "Screw the economists. I am only allowing this deficit to a stage that we can affort and there should be a plan to pay back growing debts". One must realise that whilst we target to reduce poverty and to achieve a 'Developed Nation' status, we must also include our debt level as a KPI. We must be targeting to be an independent country. Independent from foreign debts; or else, whatever independence we obtained back in 1957, will mean nothing when the global financiers control our country - ie we are slaves to those who control the money.

Why should Pak Hamid of Cherok Tok Kun pay higher price for his motorbike petrol only to go to the groceries shop at the end of the town to buy an overpriced sugar and cooking oil?

At a debt of RM300 over billion, no wonder Idris Jala had to be the unpopular one to remind the nation. Whilst the public sort of agrees with Idris, it is unfair for the public to bear almost most of that burden. Why penalise the tax payers or the general public heavily by lifting too much of the subsidies. The government should relook at its budgets and cut down unnecessary spending such as buying submarines and what not. Use that money to reduce the nation's debt. Why should Pak Hamid of Cherok Tok Kun pay higher price for his motorbike petrol only to go to the groceries shop at the end of the town to buy an overpriced sugar and cooking oil?

The highest most concentrated consumer of petrol in the country, by perception, would probably be the Independent Power Producers (IPP). They benefit from such subsidies given that their gas prices are fixed for donkey years. Not just that, their selling prices are also fixed with Tenaga Nasional for monkey years giving a fixed margin self adjusted for inflationary operational cost trend going forward as secured in the Power Purchase Agreements (PPA). You can argue till the cows come home that by doing that, we can limit the impact of electricity price escalation to the end consumers (but yet there were electricity tariff upward revision in the last few years) - but really, if you really want to do that, why not give the subsidy to Tenaga Nasional instead. Let the IPPs manage their business in a competitive environment of market price when it comes to buying gas and selling electricity just like in Australia. For a Jo-Bloke or a Pak Hamid sipping the teh tarik, they sort of feel that that market mechanism has been imposed onto them rather than the few rich who are behind the IPPs.

Oil and Gas sector contributed RM68 billion to the GDP representing approximately 13%. That is a high figure. Therefore any matters from the Oil and Gas sector that has direct impact to the country and its citizens must not be taken lightly. We must look at it logically. We are a petroleum nation. We produce loads of petroleum and we export our high quality low-sulfur petroleum to foreigners and we buy low quality cheap petroleum from Middle East for our domestic consumption. Why on Earth are we paying high prices for petrol when it is our specialty? It does not make sense for the subsidies to be lifted when the revenues collected from the government are being used for white elephant projects. I'd love to find out how much Putrajaya costs us. Would that money be enough to pay back the nation's debt? You can create an administrative city but to make it beneficial to the country, it has to be a continuous development with a view of creating economic value. What we see is a great idea that ended up to be an expensive city with nothing more than aesthetic value.

As I mentioned earlier, perception matters. The general feel is that the citizens are being punished over and over again for the monies not wisely spent in the past. The 1997 financial market crisis called for the nation to bail out Malaysia's financial service industry. Whilst other countries in this region opted for the International Monetary Fund's (IMF) assistance, we Malaysians went on our own via Danaharta. An unofficial source worked out that the tax payers only paid at most RM100 per year for 5 years to allow the necessary funds to be used by Danaharta to acquire the Non-Performing Loans (NPLs) from the financial service sector and rework its recovery. Danaharta has achieved its objective and has since cease operation. So the people bailed the country. Now, they are expected to bail the country from brink of bankruptcy with an astronomical figure of RM300 over billion. You must be crazy. I think, in a nutshell, the citizens of this country are willing to contribute to the nation's well being but when huge amounts of nation's monies were not spent wisely, in the past and current, a sense of reluctance develop. It's a mind game and managing perception again.

I acknowledge that some efforts by the government are good. For example, by 2015, the government aims to make Malaysia one of the top 10 nations in the world for doing business. Malaysia ranked 23rd in the World Bank Doing Business 2010 report. This is a logical aspiration, a healthy target and benefits the country particularly from economics aspect. Initiatives will include rationalisation of business rules, relaxing foreign ownership, introducing Competition Law and improving government sector services quality. This is congruent with the various initiatives such as Asean Framework Agreement on Services (AFAS), World Trade Organisation (WTO) and Free Trade Agreements (FTAs). However, there are some initiatives which may not get the full support of the people. As mentioned earlier, the uplifting of subsidies is one of them. The introduction of Goods and Services Taxs (GST) will have almost immediate negative perception psychological impact on people and New Economic Policy (NEM) will stir the hearts of 70% of the nation's population as described in my earlier blogspot NEM means?.

Last but not least, the Bumiputra agenda. The Bumiputra equity of limited companies were only 2.4% in the 70's. Now we have approximately 22%. A significant improvement but yet failed the target of 30%. Though efforts have been continuously made in the past 30 years or so, they never seem to be enough. With the uplifting of the 30% Bumiputra equity requirement and the incorporation of Ekuiti Nasional Berhad. the government continues to address this matter but in a less regulatory manner. It's fair but perception needs to be managed. Goverment has now revealed more information on how this will be done. This helps public to clearly understand instead of jumping to conclusion. People have been waiting for such clarification in the past months or so.

Small Bumiputra businesses will be promoted via funding and infrastructure provision. Bumiputra businesses in growth areas will be assisted to address its competitiveness against its counterparts. For mature Bumiputra businesses, opening of new markets and participation in strategic areas will be the key focus. Hopefully, the 30% target will be achieved by 2020, if not, sooner. In the past, companies were required to allocate 30% equity to Bumiputras. However now, the focus is on Bumiputra capability and participation in management of businesses. This involves 4 key principles: market-friendly, needs-based, merit-based and transparency. This I hope, will reduce the use of Ali-Baba companies.

Let's just hope that this new decade will end up as we planned. God created great nations, and there is Malaysia, emerging.

* kopihangtuah

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