Wednesday, October 12, 2011

Budget 2012: Fishing Like The Grecos

On Budget 2012, I was more interested in the number and the nature of the points that will be announced that are in individual basis, that is things that will affect on the individual capacity such as income tax reduction, or relief and so forth. By the end of the announcement at around 6 p.m, I made a rough count of 20 points that were mentioned in the budget. However, seeing how it was listed down, I have to say that it won't help much for a working professional, with just a few years out of the university life and into the real working world.

There were a few measures that can relate to the scenario above like allowing the First Home Scheme cap to go up to RM400K and compelling the employers to pay 1 more percent to their share of the monthly EPF for those earning less than RM5000 per month. The problem is, these measures are more or less plugging one hole but they overlook the other holes that have to be plugged. 

To elaborate in the context of the two cases above, the house example poses problems for people particularly in the Klang Valley. For instance, where can we find and buy houses / apartments that fall in the maximum cap of RM 400K? Secondly, even if the scheme supports it, do we have the means to repay the entire housing loan in the longest loan period of 30 years? Many of us do not have the understanding of what Kiyosaki said in this kind of case before that a property purchased with a bank loan is not an asset. It is a liability and it will be until it is cleared. In the space of 30 years, coupled with yearly interest, the debt incurred will also be passed to the children as well. In fact when they are born, they owed government money because of the way the people's money was misused!

Compelling the employers to pay 1 percent more on EPF doesn't really solve the problems. It in fact gives more problems to employers. This is already in addition to the standard corporate tax of 25% that they have to pay. Asking employers to pay extra without something to compensate in the process is hurting business more, which based on the speech text, Najib doesn't seem to anticipate this problem here. How will business do if this measure eats more to the current operational cost? This is what some people running a business would be complaining about. And when the business doesn't do well, there can only be either three options: retrenching workforce, wind up the business or move the business to somewhere else.

Having counted the number of measures (snapshots in particular), a quarter of the measures listed are aimed at civil servants (e.g, mandatory retirement, increment of salaries, bonuses, etc). Then there are also one-off payments for ex-military personnel, book vouchers for university students, vouchers for primary / secondary students, annual increment of pension by 2%, what more? It's easy to imply that these things are more for fishing the support of civil servants, rural area folks and those in the low-income bracket for they form the big core number of support (in vote translations) for Barisan Nasional of course. This has already raised many doubts and nay says from economists, educated people with financial understanding, opposition party people that budget won't do good.

As if it is meant to entice support from civil servants and the shoring up of support of the BN butter-up boys, the budget is not to changed and reshaped the entire nation's present economic structure but just to inject crack drugs into its financial nervous system. When Najib said that the present forecast GDP was would be less than 6%, he in fact a shot himself in the leg. As it was commented during Budget 2011, in order for the ETP to work, the annual GDP will have to be at least 6% or more from the inception period until to the end of the ETP timeline program which is in the few years. But with the present crisis in America and Europe, it is quite hard to maintain that forecast. 

And of course, the snapshots of the Budget doesn't show real reforms and restructuring. There is nothing new actually in what was announced. Some of the measures are considered recycled. They were once mooted in the last decade but because of opposition from the employers and the fallout of the Asian Financial Crisis 1997, some of the things were dropped originally.

When it comes to retirement, what is the actual ratio of retirement of people in private sector vs people in the government sector? If the incentives mentioned above are meant for those in civil service and those in the retirement, those in the private sector will start to ask where is the sense of fairness missing out. This would definitely spur the anger of why a person at the same age but working in the different sector gets more money to retire than those who work in private sector but get less retirement money. Was this never considered at all when putting the action plans of the budget into paper?

The formula of spending more and more stimulus measures to boost the economy could no longer work unlike in the 90s, in which Dr. Mahathir is famous for. This Keynesian concept is already ineffective, since as it was proven in America, the stimulus package that Obama signed has still yet to convince Americans, with the number of unemployed still around 5 million nationwide. 

I was constantly saying in the last few days that Budget 2012 is fishing the civil servants and the low-level supporters like the Grecos do. Greek is already facing towards default and need of bailout because of the attitude of the previous government. Two causes have been identified behind their problems: one, the mismanagement and overspending of their coffers by the previous government and secondly, the high number of civil servants, although it already is a surplus to what is needed to run the government departments. Malaysia is in the direction towards the similar disaster, although many politicians like Najib and Muhyiddin showed the attitude of dismissing what is forthcoming in years to come. 

The budget presentation is like injecting a booster. This means every time a booster is injected, like a drug, people start to crave more and more until they cannot stop. Why the youngsters in Britain and why people there riot in Tottenham a few months ago was simply because they were angry that they could not be fed with various measures usually the British government would provide them. When they don't give, they start doing violent things. If you put it in the way of not giving the drug to the person who has been addicted to it, you would see the strange behavior of a subject involved.

Will Malaysia become like Britain and Greece? Yes. In the years to come, with too many civil servants surplus to what is needed and the attitude of expecting yourselves being spoon feed all the time. These measures of introducing GSTs, (for example) are unknowingly what the economic hitmen would tell the Najib administration with a hidden agenda: to rob and cheat the country of the money. And it can be like the Indonesian scenario again. 

We have to relook at the Budget snapshots and ask whether if it will help people in long term. There's absolutely none that addresses the reforms and provides outlines of long term problem solving. If for some reason you notice that there's something not right with the Budget (like not much help) but yet you still support them, then I do not have any other answer to explain the reason apart from the answer of "you got conned and duped".

No comments:

Post a Comment

You are welcome to post in any comments that do not trouble readers of the blog.

Providing an ID is recommended. If some reason you wish to use an Anonymous name, please leave a name below your comments. From now on, comments with no names will not be considered for moderation.


Related Posts Plugin for WordPress, Blogger...