PRU13: DO WE REALLY WANT 100% OF THE MANIFESTO?

The Election Commission (EC) has just announced that PRU13 will be held on 5 May 2013.  Both Pakatan Rakyat (PR) and Barisan Nasional (BN) have released their manifestos, in the case of BN, it is called ‘Akujanji’.  Each side claims the other side plagiarised its manifesto.  It sounds childish really.  I do not think many voters care whether they copy each other or not.  If the pledges are good for the country, it SHOULD BE in both manifestos.

 

In general, I find both manifestos disappointing and too populist.  On the economic side, there are no pledges to reduce government expenditure and debt although BN does pledge to reform the tax system.  Malaysia has been recording 5-6% annual economic growth in the past 5 years and yet the government spending continues to be in deficit, largely as a result of increase in government spending.  Can you imagine what will happen if Malaysia’s economic growth slump to below 3% or worst, suffer a recession?  The country could go bankrupt regardless which manifesto is implemented.

 

On the governance side, other than a couple of pledges to eradicate corruption, there is nothing much else in BN’s manifesto.  It is surprising since issues of corruption and lack of governance as a whole has been raised by many in the past few years.  PR meanwhile, has come out with quite impressive pledges to reform Parliament and other government institutions in its manifesto. 

 

For a start, I will touch on the strengths and weaknesses of each manifesto.  More points and arguments on specific pledges/ issues will be touched later.

 

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BN ‘AKUJANJI’

 

Strengths

 

"Reforming the existing tax structure towards a more broad-based tax system and gradually reducing personal and corporate tax”.  I guess this means Goods & Service Tax (GST) will be implemented.  Malaysia requires wider sources of revenues and a tax reform is very much needed.. especially when the government plan to give more handouts.

 

Opening 1Malaysia Daycare centres in all GLCs and Government offices and encouraging the private sector to do the same.  This initiative does not take centre stage in many media but daycare centres at workplace is a necessity and solve many problems.  It helps reduce a family’s expenses and reduce demand for foreign maid among others.

 

Weaknesses

 

The BN shoots itself on the foot by claiming “Malaysia needs a strong government” at the opening of its manifesto.  The impression given here is that Malaysia needs a government that controls 2/3 of Parliament.  The idea of a ‘strong’ government is so outdated.  What the rakyat ask for is a ‘fair’ government with proper governance that allows check and balance to its actions, not a ‘strong’ government that bulldozes policies without proper consultation in the Parliament.  It does not help either when the manifesto lacks substantial pledges to improve governance other than reforming MACC .

 

More and bigger cash handouts such as BR1M, 1Msia Book Vouchers and Schooling Aid.  Cash handouts DO NOT reduce poverty and DO NOT narrow the income gap.  These handouts will be hard to stop when it become an annual as recipients will see them as their ‘RIGHTS’ instead of ‘ASSISTANCE’.  Bear in mind that our huge fiscal deficit and debt might make these handouts untenable in the future. 

 

Some of BN's economic pledges are still race-based such as outsourcing GLC programmes for Bumi companies and providing seed funding to increase Indian equity.  It shows that BN is still going to implement race-based policies. 

 

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PR MANIFESTO

 

Strengths

 

Pledges made under “The People’s Government” to reform Parliament and other relevant government institutions are the manifesto’s strength and a huge one since BN fails to address these issues in its manifesto. 

 

Weaknesses

 

PR also resorts to cash handouts such as RM1,000 each year to senior citizens.  As I mentioned earlier, cash handouts DO NOT reduce poverty and DO NOT narrow the income gap.  Not all senior citizens need that extra cash anyway.

 

A minimum wage of RM1,100 per month. In general, i am against minimum wages especially when it is enforced across the board.  If the intention is to encourage higher distribution of profits to employees, employers should be incentivise to share their profits with employees.  Imposing higher wages will only make employers restructure their operating costs which does not necessarily benefit all employees. 

 

More subsidies such as lower fuel, lower electricity and water tariffs, abolishing tolls. and free public tertiary education.  In general, the PR government is re-allocating subsidies from companies to individuals.  These initiatives, although ‘attractive’ to voters, could add more strain to government finance.  Re-negotiating concession and IPP agreements, as well as liberalise the market will lead to lower prices for consumers.

 

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Looking at both manifestos, do we as voters want the winning party to implement 100% of its manifesto.  I for sure do not want that.  Implement the “good” pledges should be enough.

 

 

MALAYSIAN FOOTBALL LEAGUE.. IS IT PROFESSIONAL ENOUGH?

Last night, I attended a Super League match between PKNS Selangor and Johor DT at Stadium Shah Alam.  It was an entertaining match.. opportunity to watch Guiza’s skills ‘live’, plenty of goals, and Johor DT won.. Yeah!! (I was born in Johor J ) 

But what actually caught my attention was that there were less than hundred PKNS fans at the stadium, outnumbered 20 times by Johor DT’s fans, and this was supposed to be PKNS home ground.  It made me thinking.. how can PKNS survive financially with this small number of fans?

Let us take a look at professional football clubs in Europe.  Their main sources of revenues come from gate revenues (attendance to home games), sponsorships, and rights/ royalties from clubs’ merchandise.  All these revenues require core fan base.  A club need supporters to attend its home matches and buy its merchandise while sponsors will only come forward if the club have supporters that watch the team play.. it is simple marketing rule.  So, how can a team like PKNS survive in the long-run if only 100 fans turn up for a home match?  Malaysian football turned professional in 2004 and after nearly 10 years, we still have clubs with no supporters playing in Super League.

Other than state or state-linked teams (T-Team and Johor DT), there are 9 clubs in the Super and Premier League with no or limited fan base.  All these clubs need to have wider fan base if they want to be a successful professional football club.  For example, ATM cannot expect to have only soldiers as its fan base and playing at Paroi this year for its home games, far from its fan base, make it worse.  They could use for example Sungai Besi as their home base, make football fans in Sungai Besi and surrounding area feels ATM is their team, and play their home games in KLFA Stadium in Cheras, which is nearby.  In some cases, re-branding might be necessary.  For example, Sime Darby FC can re-brand itself to Sime Subang Jaya to expand its fan base from only Sime Darby employees to include Subang Jaya community (or any other location).

Relocation can also be made to create a new fan base.  We are a football mad country and there are many locations in the country that can be made a home base for a professional football club.  It does not make any economic sense to have 8 football teams with home base in Klang Valley.  Most of these teams are competing with Selangor that already have strong and loyal fan base.  Temerloh can be a good home base for Felda United for example.  Pahang have some of their matches in Temerloh last year with good crowd.  I am quite sure football fans in Temerloh will appreciate regular high level football matches and support a team that is based there.

A professional football club is supposed to be profit-oriented.  Therefore, it needs to attract the crowds to generate income.  Without strong fan base, I am quite sure most of these clubs suffer operating loss every year.  To cover for that loss, they need grant from FAM or cash injection from their owners.  Since majority of owners are public entities, I suspect public money are used to finance these clubs (yup.. our taxpayers money).  Professional league means having professional clubs/ teams, not just having professional players.  So FAM, please make sure there are only professional clubs/ teams in our league before calling our M-League a professional league.

LISTEN!! RESPECT others' opinions and THINK!!..

I haven’t had the time to write in my blog in the past few months, but events in the past few days make me have to write this.  It seems that many of us in this country have forgotten how to respect other people’s opinions.

To start with, I want to express my sympathy to my fellow economist Azrul Azwar.  He presented his forecast of 3 scenarios for the forthcoming PRU13 and their impact to Malaysian economy including scenarios where PR would win it.  Surprise surprise.. he got suspended by his employer Bank Islam for “serious misconduct”.  Ok.. his forecast is not in line with Bank Islam’s “official view” but Bank Islam did come out with this statement “The views expressed by Mr Azrul are not entirely his personal view and should not be linked or attributed to Bank Islam whatsoever.”  If that is the case, then why suspend him? 

What I find even funnier is the remark made by Deputy Finance Minister Awang Adek Hussin “.. he should not be talking about politics..”.  Dear Sir, do you really know what an economist job is?  An economist has to come up with economics forecasts taking into account all variables including politics.  I am quite sure Tan Sri Zeti is offended with such remark.  Actually I am not surprise by the Deputy Minister remark, I had experience working as economist in government environment for 8 years and I dare say most of the people “up there” don’t know what the scope for an economist is.

What concerns me most is the attack by pro-government blogs on Azrul’s professional views.  Noted that he is a PKR member, so his views might be biased towards PR.. but to attack his credibility as a seasoned economist is below the belt, guys.  If you don’t agree with him, come up with facts why his scenarios were wrong.  If you attack him just because he is a PR member, then the same can be said to other professionals out there who are UMNO, MIC or MCA members.. all their opinions are worthless.  So, whose views can we listen then?

This brings me to the event in UUM that went viral in the net for the past few days.. “LISTEN!.. LISTEN!.. LISTEN!.. “.  This incident exposes the classic case lacking respect for others’ opinions.  For Sharifah Zohra to cut Bawani from continue giving her opinions (by pulling the mic, can you believe it?) was without ‘adab’.  Then, telling Bawani should LISTEN to her because she is older and belittling Bawani as having the least education among the students there just because Bawani has different opinions from her.. well, make me have no RESPECT to her.  Sharifah.. I hear more facts from Bawani than you in that 10 minutes incident.

What happened in UUM actually represent what is happening in this country lately especially with PRU around the corner.  Everybody is categorised as either BN or PR supporters and thus, all opinions are considered bias without looking at the supporting arguments.  If I say BR1M is good, people will say I am a BN supporter.  If I say free education is possible, people will say I am a PR supporter.  What if I say both.. I guess I am not a Malaysian then because Malaysian should be either BN or PR.. SERIOUSLY??

LISTEN!.. LISTEN!.. LISTEN!.. is a virus that if left unchecked will leave our society divided and unable to think.  Why should we be surprise Bawani was treated that way when a Chief Economist was treated the same way?  Granted that both gave opinions that favoured PR, but are we too brain-dead to absorb the arguments given and counter them with our own arguments with facts?  If we can’t counter them but don’t agree with them.. show our respect, sit quite and shut our mouth because the moment our mouth opens, stupidity will come out.  Think about it.  Instead of LISTEN!.. LISTEN!.. LISTEN!.., we should be actually THINK!.. THINK!.. THINK!

BUDGET 2013: A Review

The Budget 2013 presented by the PM last Friday was a surprise.  I was caught off-guard with the lack of “election promises” in it.. well, if you take out the handouts and unprecedented 1.5 months bonus for civil servants.  I think Budget 2012 had more election promises (thus, the Janji Ditepati campaign).  The plea for votes at the start and near the end of the presentation is a proof however, that it was still an election budget.

I would say the Budget 2013 is fair (in a rating system, I would give it a 3.5 star rating from 5).  The Government does well to balance its fiscal responsibilities and populist measures.  However, it lacks creative solutions in handling “hot issues” such as high cost of living, high crime rates, etc.  Most of the measures are direct subsidies and incentives taken straight from conventional economic text books (PR’s Belanjawan did better with creative proposals).  As a country undergoing economic transformation, the lack of “out of the box” measures is disappointing.

Below are my thoughts on some of the measures in Budget 2013.

Children

·       Tax Incentives for operators of childcare centres and employers who provide allowance or subsidies to their employees for the maintenance of childcare centres. 

I believe this will provide some relief especially to middle and lower-income families in the city.  Lack of affordable childcare centres have caused many families to hire maid to take care of their young children.  With the rising cost of hiring a maid, the cost of taking care young children has become one of the major expenses for families in urban areas (By the way, I am surprise that childcare/maid is not part of expenses for average middle income households).

Handouts

·      Continuation and extension of BR1M.

·      Schooling Assistance of RM100 to all primary and secondary students.

Continuation of handouts will make it harder for the Government to stop them in the future.  The handouts are given at a time when Malaysia is recording 5% economic growth.  Just imagine if Malaysia records 2% of growth or lower, the rakyat will expect bigger handouts.

As for the Schooling Assistance, how many of us did really use them to purchase something ‘educational’.  Not to forget, the extra expenses by the schools in hiring security to collect those money in cash and keep them at school.  It is much better if the allocation is channelled to individual schools (based on the number of students) for the schools to spend as they deem fit (for the benefits of their students of course).

Internet-related

·     100 1Malaysia Internet Centres in selected urban poor areas

·     Smartphone rebates for youth

These measures were intended to increase the poor and youth access to the information highway.  However, both measures targeted have its limitation.  Internet centres have its limitation in capacity.  As for smartphones, they are available in the market in wide range of prices as cheap as RM500.  Most youth already has a smartphone and a rebate will only make youth upgrade their phone to a more expensive one.  I think the issue at hand is the cost of accessing the information highway and a better measure would be the creation of more free Wi-Fi hotspots in targeted areas to reduce cost of access.

Investment

·     Tax incentives on investment made by an angel investor in a venture company.

This is one of my wish list.  It would be much better if the Government tops up the investment to reduce the investors’ risk.

PTPTN

·      PTPTN discounts.

Although the Government tried to put the discounts as a measure to reduce the burden of young people, I see the discount as a way for the Government to collect the debt as soon as possible for its coffers.  There are other ways to reduce the burden of PTPTN debtors such as reducing/eliminating the administration fees.

Subsidies

·       Reduction of sugar subsidy.

I was not expecting many subsidy reductions as it is an election budget but only one subsidy reduction is very disappointing.  I was expecting at least a timetable on subsidy reduction as what suggested in PEMANDU’s subsidy rationalisation plan.  Admittedly, cutting back on subsidies is a tough choice to make but delaying it further will make it tougher in the future to restructure the government’s finance.  

Tax

·       "A review of Malaysia’s taxation system will be continued to ensure the taxation system better reflects the household’s financial position”.

Another one in my wish list although it was just a sentence in the Budget.  It hinted the implementation of GST in the next few years.

·       Reduction on individual income tax rate by 1 percentage point for individuals with annual income less than RM50,000.

I find this measure puzzling.  This measure will only provide a maximum saving of RM425 per person.  After taking into account the new tax rebates and reliefs, I guess the saving will be RM300 at most.  As a result of this measure, 170,000 taxpayers will be removed from paying tax. It further reduces the number of people in the workforce that pays tax, cutting further the government’s revenue sources.  This measure shall be introduced at the same time with GST, as a carrot for GST implementation.  Now, the government has one carrot less when the time to implement GST comes.

 

Pakatan Rakyat’s Belanjawan 2013 – A Commentary

Pakatan Rakyat announced its Belanjawan 2013 (Belanjawan sounds nicer, isn’t it?) this afternoon.  You can download the full document HERE.

The Belanjawan is a people-friendly budget as expected.  Whether the numbers believable or not are arguable though.  Going through the document, I feel that the Belanjawan is city-centric (PR’s existing voter base) with less emphasis on rural.  The only major proposal with direct impact to rural areas is Pan-Borneo Highway (targeting East Malaysian voters).  There is only 1 page titled “Increasing Incomes and Employment Opportunities for Malaysians in Rural Areas”.  Overall, I feel the Belanjawan succeed in providing possible answers to current “hot issues” such as transportation, cost of living and monopolies in industries.

I won’t be going into details of the Belanjawan but below are my ranting on some of the contents.

Thrust 1: Increasing Disposable Income, Alleviating Economic Hardship

One of the proposals in this Thrust is the implementation of universal minimum wage of RM1,100 for the public and private sector.  Generally, I support the implementation of minimum wage but to make it universal across the board is very simplistic.  Cost of living is different between locations and productivity level is different between industries.  Thus, not all private sectors can afford to pay the same amount of minimum wages.  More detail studies shall be made to ensure each industry deserves its own minimum wages.  The same can be applied in the public sector.

Another proposal under this Thrust is the popular one.. abolishment of PTPTN as PR believes that tertiary education shall be free to all Malaysians.  I was not in favour of PTPTN when it was first created but for opposite reason.  I don’t believe everybody shall get a loan for tertiary study.  Some of them deserved to be fully or partially subsidised (based on performance and socio-economic status) while the rest shall pay if their families can afford it.  Furthermore, with increasing education costs and population, free tertiary studies will be a big hole in government budget in the future.

Thrust 2: Building Entrepreneurial Class, Promoting Constructive Competition

One of the proposals in Thrust 2 is to refocus all government investments and ventures into business in Khazanah Nasional.  I am a believer that government shall not venture into business.  Revenues to the government shall come from taxes and not dividend.  But as a developing country, it is understandable that government have to venture into some business for strategic reasons.  PETRONAS is an example. 

I will therefore go one step further to make Khazanah focus only on strategic investment and not compete with the private sectors.  Because of its strategic investment, the KPI shall not be minimum dividend as proposed in the Belanjawan.  KPI can be designed to ensure Khazanah’s focus remain on strategic investment.

Thrust 3: A Just Society With Dignity and Pride

One of the proposals under Thrust 3 is the establishment of state-owned second-tier oil and gas companies for oil producing states to benefit from risk-sharing contracts in marginal fields.  I find this proposal unnecessary as the issue at hand here is the awarding of these contracts to alleged cronies.  More transparent award process shall eliminate the issue.  We do not need many PETRONAS.  I would suggest that some of the royalties paid to the states to be used for investment in alternative energy in anticipation of lesser oil production in the future.

Now, waiting for the government’s budget this Friday..

What I Want From Budget 2013 – A Preview..

Its time of the year again.. Budget 2013 to be presented by the PM this Friday.  Let’s be honest.. not many people really watch the Budget in its entirety.  I’m a trained economist and yet I find the Budget presentation a bore.. hehe.  It does have sentimental value though as my eldest son was born on Budget Day 2000. 

What presented during the Budget does affect our choices in life.  Civil servants hoping for a high bonus, wage-earners dreaming for no tax (yup.. you are allowed to dream) and the public in general hoping for free gifts such as continuous BR1M.  All these influence our choices in life.

OK.. let see what I want from the Budget this time around.  I DREAM of a holistic budget for a change.  This year will be the 3rd time in a row it is called ELECTION BUDGET.  So, I expect this Budget to be pleasing to the eyes of the voters without any ‘tough decisions’ made.  Lots of TRANSFORMASI under the government but I swear I haven’t seen a tough OPTIMUS PRIME in our Budget so far.

So.. what is my DREAM holistic budget? Below are some of them..

1)      Revamp of Tax System

A lot of hoo-ha on the GST but I just wonder whether the govt has take a look at the whole tax system.  The govt’s revenue still relies on direct revenue (a large chunk from Petronas’ generous dividend).  Therefore, the GST need to be introduced (but I doubt it will be in this Budget since it is not voters-friendly) although it must be accompanied by assistance to the poor and middle-income.  The govt should have introduced GST and BR1M simultaneously to balance out any negative impact of GST. 

2)      Focus on Implementation Rather Than Allocation

Every year certain amount is allocated for this and that.. I wonder whether those allocations reach the targeted people or not.  For example, every year huge allocations are made to SMEs but my clients and many other SMEs always complaining about difficulty in accessing these funds.  There is no point of making huge allocations but the implementation or distribution mechanism is still at “ice-age” level.

3)      Incentive for Private VCs and Angel Investors

Sources of funding for SMEs in Malaysia are limited to financial institutions, govt funds and VCs.  Unfortunately, existing VCs are largely funded by govt and thus, the process is sometimes tedious and not up-to-date (as I mentioned in number 2 above).  There are many individuals out there with plenty of cash who are willing to invest in new businesses provided that certain incentives are given to minimise their risk. 

4)      Allow Small Banks to Operate

There is lack of focus from existing banks on SMEs.  Partly it can be blame on banking mergers in the last decade, creating huge banks which directly lead to entertaining huge clients.  I believe allowing private small banks catering for specific niche market will allow easier access for SMEs via more creative products.

I am waiting for PR’s alternative Budget scheduled tomorrow.  PR’s Budget is always populist but in the past, it has shown some creativity in certain areas which the govt’s Budget is lacking.  Will review it once it is presented, Insha’Allah.

Before I end this RANTING.. don’t you think the BUDGET sounds nicer in Malay as BELANJAWAN instead of English-adopting BAJET?.. hmm..

WELCOME TO RANTING-NOMICS!!

Hello people!  Welcome to my blog.  This blog consists of my rants on anything and everything with economics spin to them.  I believe there are always economics aspects on everything in life.. which is why RANTING is not only for my rants but also means BRANCHES in Malay. 

So.. enjoy my RANTING.. and do post your comments regardless whether you choose to agree or disagree as choices are science of economics J.