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When 73% of the budget goes to operating expenses (including 12.1% for debt repayment) and the rest to support the government apparatus, it simply means that last year’s templates are very relevant and can be copied. Financial creativity is not required here.
The only financial challenge is how to allocate the remaining 27%, called development spending. Intended to boost the economy and address the financial difficulties faced by many Malaysians, especially the B40 group, this is where the government makes it or breaks it.
There are many elements within this 27% development expense. Some are quite relevant to driving our fledgling economy and some are not. Among the items are various transportation projects such as high speed rail (HSR) and MRT3 mass transit projects.
It is implausible and a luxury to include HSR and MRT3 in this deficit budget, as the two projects may not have the necessary prerequisites to reverse the trend and the negative economic climate of the nation.
In fact, both projects will have the opposite effect, as they are very expensive for a deficit budget for many years.
HSR, for example, has become completely superfluous and unnecessary and was misconceived at a time when travel demand between KL and Singapore is at its lowest due to the Covid-19 pandemic.
Many transportation companies, such as express coaches, airlines and train operators, are facing financial difficulties with the likely eventuality of closing the store.
The government budget should only be allocated once the economic benefits can be clearly defined, quantified and stated.
How could we be so naive in allocating a budget for a new transportation system when the problems and problems faced by existing operators, who are in dire financial straits, have not been satisfactorily addressed and resolved?
Why are we allocating our hard-earned taxes and limited income to projects we don’t really need right now? Worse still, our collection of taxes and other government revenue represents only about 73.5% of the total budget for 2021.
Deficit budget
When combined with development spending, it means that we are running another deficit budget once again. For more than 10 years, precisely since 2010, we have had a budget deficit every year and this trend will likely continue for many more years.
That means that, all these years, we have been covering deficits with loans that now represent 60.7% of our gross domestic product. In fact, in next year’s budget, 12.1% of spending is to pay off previous loans.
By 2021, the deficit in the budget, about 26.5%, will be financed through more loans.
The Ministry of Finance should not pretend that these high-cost projects are necessary to lead our ailing economy. This is not true at all.
In fact, financially it doesn’t make any sense that high-speed rail technology, from its tracks, locomotives, wagons, electrical components and signaling systems, is totally imported.
Paying billions of dollars to foreign companies and suppliers will definitely not help the local economy.
Local content
Just take a look at the East Coast Rail Link (ECRL) contracts. What percentage of the price of RM 40 billion, for which the contract had been awarded to foreign companies, went to Malaysian companies?
How many local consultants are involved in this gigantic project? How many local equipment suppliers have benefited financially? How many jobs were created for the locals?
So where is the local content that the government has been insisting on that has helped rejuvenate the country’s economy and solve the problem of high unemployment?
Perhaps the ministry of finance, the ministry of transportation or MR Link, the agency that supposedly manages the ECRL project, should clarify and publish all this data and information on a regular basis.
Let the public decide whether the case for economic benefits and job creation is valid. Make this data your standard KPIs.
In addition to HSR and MRT3, there are several other high-cost projects that are also included in the budget.
These include the Klang Valley Dual Track Phase 2 Rehabilitation Project (KVDT2), the Gemas-JB Dual Track, the Pan Borneo Highway, and the JB-Woodlands rapid transit system.
For the sake of transparency, please post data and information about these projects and show us the local content as well as the number of local employees involved.
While KVDT2 was previously awarded to a Malaysian company with high local content, this contract has been canceled by the Ministry of Transport. Why?
Following the same reasons and principles, the ministry should be consistent and cancel other large contracts as well. Why the double standard?
I hope that our parliamentarians are literate enough to read the figures further, especially the 27% allocation.
Hopefully, they can and are willing to take the appropriate steps, such as discussing and revising the budget proposal accordingly, so that this budget lives up to its name, as a single budget.
The opinions expressed are those of the author and do not necessarily reflect those of FMT.
