A bitter sweet budget - Tony

The newly announced budget needs to be looked upon from two perspectives – macro and micro. From a micro perspective, the government must at least be given some credit for shifting its emphasis to what concerns rakyat the most today – that is the impact of record levels of inflation on the people's livelihood.

The prime minister spoke of a social safety net, encapsulated by the commendable measure to increase the threshold for welfare eligibility from the current RM400 per household to RM720, which is the poverty line for peninsular Malaysia. This will cost the government RM500 million.

At the same time, he also attempted to address the need for an efficient and convenient public transportation system. In this aspect, the government's effort is lukewarm at best.

Despite an impressive headline figure of RM35 billion allocated for public transportation, it actually only works out to RM5.8 billion a year over the next six years. In fact, if one looks carefully at the budget for the transportation sector, it has declined by RM1 billion to RM11.5 billion.

The education and training sectors are among those which benefited the most, with overall allocation increasing to RM48.8 billion from RM44 billion previously. This makes up a healthy 23.5% of the total budget.

However, while there were quite a few other sweets which were distributed fairly generously in this budget, I'm deeply concerned over certain macro developments on our budget which in the longer term may place our economy in jeopardy.

Firstly, I'm taken aback by the size of the increase in budget expenditure for this year, 2008 as compared to what was actually budgeted last year.

Last year we heard the government announcing a record budget of RM176.9 billion, but based on the latest figures, we will grossly exceed our budget by RM20.3 billion to RM197.2 billion.

This basically means that despite record revenue and a record budget, our government couldn't prudently control its expenditure (well, either that, or they couldn't do a proper budget).

What makes the issue more glaring is the fact that it is the operational expenditure i.e. rental, maintenance, stationery supplies, civil service wages etc, despite being at record levels in the budget announced last year, that busted the original allocation by 17.2%, increasing to RM151 billion.

Next year, the budgeted operational expenditure is another record RM154.2 billion. This figure is both shocking and scary as operational expenditure for the government when Abdullah Badawi first became prime minister in 2004 was only RM80.5 billion.

In just a short period of four to five years, government operational expenditure has increased by 91.5% or RM73.7 billion. This raises the question as to what the government is spending its money on which requires such substantial increase in operational expenses?

Even more worrying is the fact that most of the government's revenue is sourced from the petroleum sector. Last year, the estimated contribution of the sector to our government's coffers was 37%, but for 2009, this is estimated to increase to 46.4%.

Given that the bulk of our revenue is coming from a non-renewal resource, which may last us for only another two to three decades, it would have been better advised for the government to allocate part of this oil "lottery" revenue to future use for coming generations. Or at the very least, these funds should have been placed under development expenditure.

Instead, while development expenditure did increase in this budget, its proportion of the budget continues to drop and from 27.2% in 2008 it will amount to just 25.9% in 2009.

What's more, while the government trumpeted a drop in deficit from 4.8% in 2008 to a budgeted 3.6% in 2009, it fails to state that the initial budget for last year had a target of only 3.1%.

This means that the government has clearly overspent last year and it almost means that the government's budget cannot be relied upon as an accurate measure of government expenditure for the variation was so huge despite the finance ministers having earlier this year defended the target of 3.1%.

Even more importantly, it shows that our government is unable to contain the budget deficit, despite massive inflow of revenue, from RM139.9 billion in 2006 to RM176.2 billion expected in 2009.

Hence, the potent combination of our increasing reliance on oil and gas revenues, together with the government's seeming recklessness in spending it all (and more), I'm very worried about the financial health of the country in the future, especially in the light of greater economic competition coupled with a potential global economic slowdown in the next few years.

(Tony Pua is the MP for PJ Utara and DAP publicity secretary and former CEO of an IT company)

Excerpt from http://mt.m2day.org/2008/content/view/11960/84/