Back in January, the official deficit projection for 2015 was revised up by the government to 3.2% of GDP from 3.0% due to the falling energy prices. I concluded then the new target was achievable if government revenue would increase by at least 1.2% YoY. It was a reasonable target eight or nine months ago.

Unfortunately, a lot of things have happened since then and that 1.2% YoY revenue growth does not look easy anymore. That means, the current deficit target seems incredible now.

I have updated my sensitivity analysis. I think the fiscal deficit this year will likely be around 3.5%-3.9% of GDP. I did a tighter projection for work but I can afford to cast a wider net here.

Below is a table of deficit-to-GDP, dependent on revenue and NGDP changes this year. I have highlighted several cells in red corresponding to my expectations.

2015 Fiscal deficit sensitivity analysis

The assumptions (projections?) are:

  1. 0%-2% revenue contraction
  2. 4%-5% NGDP growth.
  3. For government spending growth, I imputed 1.2% YoY into my model, which is the exact increase the government announced from its budget revision back in January. I do not expect any spending cut due to… hmm… some political imperatives and I suppose, Keynesian tendencies within the government. I am unsure how the Monday announcement would affect spending as details are scarce so far but my gut feeling says it will not matter.

The weaker revenue is mostly due to depressed petroleum tax collection, lower petroleum royalties and lower dividend. I am a bit unsure how other taxes, especially company and individual income taxes, will change. But what we do have is the first half data and individual income tax collection is already down by 33% YoY, partly, I guess, because of the earlier tax cuts. Company income tax collection rose strongly however, increasing 43% YoY but judging from earning reports so far, I think the second half will be very different.

The 1MDB Minister Prime Minister Finance Minister will table the government budget on October 23. We will know more then.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
p/s — It would be interesting to compare current assumptions with past ones:

  1. My current expectation is based on 1.2% spending growth, 0%-2% revenue contraction and 4%-5% NGDP growth. These are part of the three assumptions listed above.
  2. Back in January 2015 during the revised budget, the assumptions were 1.2% spending growth, 1%-2% revenue growth and 4%-5% NGDP growth.
  3. The original 2015 official projection, shared in October 2014, was 3.2% spending growth, 4.5% revenue growth and 9% NGDP growth.

You can see the drastic change in projections and assumption since October 2014. Maybe a table will be clearer for comparison:

Malaysian deficit ratio target change

PAP’s better-than-expected victory in Singapore has gotten BN supporters in Malaysia excited.

It tickles me to no end watching BN people looking into the Singaporean mirror and seeing men in white instead of their own reflection. They see the Singaporean reality and confuse it for a Malaysian one. Perhaps there is something wrong with the lens they wear for BN is no PAP and Najib Razak is no Lee Hsien Loong. And Singapore is no Malaysia.

Salleh Keruak, the unelected information minister, thinks otherwise. He believes the Singaporean election has proven a point about the silent majority defeating the noisy minority at the ballot box. He believes this will be the case for Malaysia and encourages the government to act as so.[1]

Former PM Mahathir Mohamed loved the argument when he was in power but in our last general election in 2013, there was no silent majority voting for BN. Did we forget 51% of us voted for Pakatan Rakyat, and that BN received only 47% for the votes? In fact I would even go farther and say the the silent majority argument has been irrelevant since at least 2008 because our society is essentially divided in the middle.

Will 2018 show otherwise?

I do not know and as a person who believes strongly in the need for institutional reforms (read power change at the federal level) instead of more investment in malls and condominium to boost the GDP, the dynamics involving PAS and the rural votes worry me. But the differences between Singapore and Malaysia are so big that there is a limit to how much the Singaporean experience is applicable to Malaysia. The minister’s confidence does not recognize that limit at all.

For one, Malaysia had no Lee Kuan Yew. His death sparked the politics of thankfulness much to the benefits of the PAP, never mind the nationalism in conjunction of Singapore’s 50th year as an independent state. What Malaysia has in contrast is Mahathir and he, unlike Lee, does not think highly of the incumbent government.

Furthermore, Singapore has no real scandal of its own. There were issues causing the PAP to lose some support back in 2011. But the party set out to address those concerns after that and apparently, sufficiently successful at doing so. This, I think, is the most important point that has been raised out there to rationalize PAP’s victory.

Malaysia? The sitting government has created more problem than it has solved. The power abuse and corruption concerns of 2008 have been amplified instead.

The minister and the proponents of the silent majority would do better if they compare and contrast the Malaysian and the Singaporean contexts closely. In fact, there is no guarantee those keeping quiet will vote for BN when the time comes.

Remember 2008?

The social media is not the best national barometer, but do not take the hostility in cyberspace to mean all is fine and dandy on the ground.

In Wangsa Maju, there is a big water pipe visible from the main road leading to Taman Melawati. On it written “Undur Najib. Kekal BN” in red paintIn Keramat, I am surprised Najib’s big poster on the UTC facade has not been vandalized yet. Maybe because there is a police station inside of it.

But talk to these Malays in Keramat, Kampung Baru, Kerinchi, Wangsa Maju and Setapak for instance. See if you will be celebrated as a superstar.

Mohd Hafiz Noor Shams. Some rights reservedMohd Hafiz Noor Shams. Some rights reservedMohd Hafiz Noor Shams. Some rights reserved

[1] — There may be thousands marching and screaming and demonstrating its displeasure. But there may be an even larger group that has no issues and do not share the views of this minority group of noisy protestors.

Politicians do not fear that noisy minority. What they fear is the silent majority because one never knows what the silent majority is thinking and what they will do come Polling Day.

The Singapore general election has proven this point. The noisy minority dominated the internet and the social media. They made it appear like they represent the majority rather than the minority. And the election result proved that the silent majority were not with the noisy minority.

Undeniably, in Malaysia as well the noisy minority dominates and monopolises the internet and the social media. In fact, many are intimidated and do not want to post their views on the internet because if you disagree with the noisy minority you would get vilified and insulted.

However, just like what happened in Singapore, the silent majority got turned off with what the noisy minority was saying on the internet and in the social media. They watched silently what was being said and the more the silent minority talked the more people were turned away. Sometimes overkill can work against you, like what the Singapore election has proven. [The noisy minority and the silent majority. Salleh Said Keruak. September 12 2015]

UAE scored 10 goals against Malaysia in the World Cup qualification. That is right. Ten against none. It is such a happy coincidence given the 1MDB and Najib scandals. It is UAE of all countries, the country which somebody sold Malaysia to.

But up next in the schedule, for September 8, is Saudi Arabia, which is probably as tough as UAE. So…

Malaysia versus Saudi Arabia. What will the result be?

  • Malaysia to win! (0%, 0 Votes)
  • A draw (0%, 0 Votes)
  • Lose by a goal or two (4%, 1 Votes)
  • Lose by 3-5 goals (22%, 5 Votes)
  • Lose by 6-10 goals (22%, 5 Votes)
  • Lose by 11-700,000,000 goals (13%, 3 Votes)
  • I have never taken these goals for personal gain (39%, 9 Votes)

Total Voters: 23

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Late after midnight… on the wall of one of the buildings along Jalan Tun Perak previously filled with protesters in yellow.

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In solidarity with the balloon girl…

KUALA LUMPUR, Aug 31 — Police have charged a woman who was detained earlier today for distributing Bersih 4 balloons at an upscale shopping mall here for allegedly attempting to stir some trouble, according to the suspect’s lawyer.

It is understood that Bilqis Hijjas, the daughter of prominent architect Hijjas Kasturi, has been charged under Section 504 of the Penal Code for “provoking a breach of peace” by distributing the balloons at the Pavilion shopping mall in Bukit Bintang during the DiverseCity International Art Festival which Prime Minister Datuk Seri Najib Razak had attended. [Malay Mail‘Balloon girl’ charged for handing out Bersih balloons. August 31 2015]

…here are the balloons of Bersih?

My favorite balloon is this big white fatso.

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I am sorry for the up close and personal shot violating the balloon, but I was on my zoom lens and I thought I did not have enough time to switch to a more appropriate one. But it turned out okay.

And Tweety!!!

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You see those normal yellow balloons? Yea, somebody got arrested for that.

And this one is a bit aggressive in a confusing way. A smiling bear with a potty mouth in need of a big soap.

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I could not make up what it said, but bodoh is stupid in Malay. And Jibby is, well, Najib, our affectionate nickname for the Prime Minister.

And as the balloon bear danced in the wind, it turned around and… haha

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Yea, angry bear. Too bad there were no angry birds.

Anyway, yea, you have to have these…

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I have no more balloon picture, but if you do read up on Malaysian social media, you will know how magical this moment was, just 10 minutes before midnight:

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One of the things I like about protests are the signs.

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This refers to the Home Ministry’s petty law gazetted on Friday to ban all yellow t-shirts with the word Bersih 4 on it. Walking around KL, or if you used the public transport over the weekends, you would see the level of civil disobedience. This also reminds of me V for Vendetta: “Beneath this mask there is more than flesh. Beneath this mask there is an idea, Mr. Creedy, and ideas are bulletproof.”

Remember, civil disobedience is a hallmark of democracy. “Donation,” probably less so.

And yes, protests require stamina, especially for Bersih-style protests. Mentally, we had to prepare for tear gas. A lot of running. And of course, strong arms to hold up the signs. See the sign next to the yellow one? Have some sympathy for him please!

Others are… well. Snarky.

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Bersih is not about toppling the government, although no doubt many if not the majority wants the corrupt man to step down and face a proper court of justice. We ain’t seeking a revolution kid, but we want change nonetheless. So, the “Bye Najib” sign is a hilarious interpretation of that sentiment.

The tildes add to the effect. Hahaha.

Some are more direct in their anger.

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For the man of doublespeak, this needs no description at all.

There were signs with coarse language. I could not point my camera fast enough to shoot it. The streets were packed with people, filled with vuvuzela noise courtesy of the South African World Cup and I had to watch where I was going.

Make no mistake, this was a peaceful protest (I hate the word rally. I am a purist and I will use the exact word to describe this: it was a protest). But, those here on the streets were angry.

The shimmering anger makes a hand-off police attitude a must. Any intervention will lead to chaos. This is true for all past Bersih protests. Hell came down only after the first tear gas was shot. I have been teared gas before. It hurts. It irritates the skin, it feels like chili in your eyes, you will have trouble breathing. It weakens you. If your mind loses control over your senses, panic will strike soon after. But, it also turns you into a hulk as soon as you recover. It is scary the first time but the next time, you are prepared for it.

Remember, this is a protest led by the middle class. The first time might be a nightmare for naive men and women on the streets. But the next time, the confrontation tactics will be more sophisticated. We are not sheep to the wolves.

But I am going off the rail.

Back to the signs!

For king of U-turns and for the king of changing stories.

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I have to explain this a little bit. Gostan is a funny Malay word originating from English. Apparently, it is a corruption of “go astern” (who on earth would tell a driver to go astern I have no idea).

Here is for the I love PM pee-brain (I am careless with spelling but that is not a misspelling of pea) crowd.

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While most signs are for the register of protest, others are more utilitarian.

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Bersih organizers were recruiting volunteers to pick up the trash left behind, and demanding participants to be responsible. Do not be a litterbug. We want a clean government and a clean street. You there! What are you doing? Pick up your trash!

Also, it will be very instructive to observe the level cleanliness during Bersih and that during the August 31 celebration. I write so because detractors say Bersih would leave behind trash, but the truth is, they do not really care and making issues out of nothing. They would not care about the trash left behind during other government-sanctioned major events.

Hell, do these people clean their treys and table when they eat at McDonald’s? They would leave their rubbish behind.

This one is for the police.

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It is an appeal for the police not to use force against the protesters, arguing that a clean government is for the family of these men and women in blues too.

And… do you hear the people sing?

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Well, not really, but you know.

This one asks, where is democracy?

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At least I think so. That is a non-standard Malay, likely more Iban or Sarawak-based. Actually, I am not sure whether my translation is correct.

There were multiple guerrilla-style notification posters. These two informed protesters where to gather and who to call in times of troubles.

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I need to go. So I will end this with a vandalism unlikely done by Bersih participants.

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Keep our city clean.

As I walked from Brickfields to Dataran Merdeka, weaving through Central Market, Tun Perak and Dataran Maybank, I spotted curious immigrants watching Malaysians marching down the streets, witnessing democracy in action.

Some of them stood by the entrance to whatever shops that were opened. Others climbed up the roof to see the vastness of protesters filling Kuala Lumpur up.


This was on Jalan Tun Perak.

When I think of the terms “coup d’état”, “overthrow”, “topple” and the like, I would think of a violent change in government. The revolutions in Egypt and Ukraine would come to my mind. Closer to home, having tanks rolling through the streets of Bangkok is another excellent example.

In contrast, when I think of the case of Abdullah Ahmad Badawi — backstabbed by his UMNO colleagues and pressured to resign what seems ages ago — the whole episode falls under the realm of peaceful power transfer.

It lacks the violence or coerciveness that colors the words “coup d’état”, “overthrow” and “topple” so thickly. The events in 2008-2009 were messy but democracy is always unruly. It is never as clean as an autocrat dressed in a democrat costume would like. These autocrats think modern democracy is about having regular elections only while ignoring other prerequisites that are just as important.

I do not think the definition of “topple” I have outlined exists only in my mind. The violent undertone it brings falls within the everyday understanding of the word. If “topple” had been used to describe the end of the Abdullah-led administration, then I would think the term has been abused grossly.

And so I frown when Najib Razak’s supporters and the police chief especially throw around that word to describe attempts at removing the prime minister from power through a vote of no confidence in Parliament. So insecure they are that even calling for his resignation is a go at coup d’état.

But perhaps after so much power and institutional corruption committed by UMNO and their BN allies in government, it is only natural for the same side to corrupt the language we use every day.

I would think they know they are twisting these words beyond their intended meaning. It is a purposeful exaggeration to meet their selfish political end, which is to stay in power even at the expense of the country.

The bigger problem is when the intended recipients of the political message, mostly men and women on the streets, accept the word subversion without critical examination and then blindly reuse it in that unnatural way.

To understand why this is an issue worth highlighting, we have to understand that language has the power to shape our opinion. Language is not merely a neutral medium of exchange but it also influences how we perceive information, and from there on shapes our views.

Since “topple” comes with the violent connotation, applying it in the context of peaceful power change would likely cause the uncritical message recipients to balk and recoil from any call for change. They would hesitate from supporting change out of fear, merely because the words used.

That is the purpose of word subversion. It tries to pollute the legitimate peaceful means of change with the created image of smoke, fire and death. It is done to instill fear in us, make us feel hopeless and convince us to do nothing even in the face of injustice. It is to discourage the case for peaceful power change.

The sages of old told us not to judge a book by its cover. But let us face it. We almost always act on the first impression. We read the headline and prejudge without reading the whole article. We live in the too-long, didn’t-read culture.

In the same line of reasoning, most of us do not think too much of how “topple” has been used. I have spotted too many innocent men and women reusing the word in the corrupted context without realizing it, thus perpetuating fear and serving the pro-Najib camp.

I am sure I am guilty of the same sin I warn of here in other cases elsewhere. It is truly tiring trying to be critical about every single word uttered, read and written all the time with a thick dictionary by my side.

But during this chaotic dishonest period when words are abused frequently, meanings are not so straight forward and outright doubletalk is the norm, we must stand guard for the tabula rasa that still exists in the corners of our mind. We just cannot afford to be the uncritical blind consumers of language waiting to be exploited in these deplorable days full of deceits.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
First published in The Malay Mail on August 25 2015.

Some dystopian science fictions rest on absurd premises.

Terry Gilliam’s Brazil is a statist world of paperwork. There is a form to fill up for everything you do. The story begins with a naming mistake in a government ministry.

Instead of Tuttle printed on the warrant, it was Buttle. That leads to the arrest and the eventual death of an innocent man the authority believed was a terrorist.

When a person discovers that the authority had the wrong person, everybody else refuses to correct or even admit the mistake for fear of having to face the impossible mountains of paperwork. And so the bureaucracy covers it up rather.

Mistakes or not, the bureaucracy is always right. Adherence to the system is so paramount that any attempt to rectify the error is an act of rebellion against the state. The state, meanwhile, does not look kindly on rebellion.

George Orwell’s Nineteen Eighty-Four is more ominous than Brazil. While people of Gilliam’s world are free as long as they fill their forms correctly, Orwell’s is a totalitarian universe with the one party controlling every facet of your life.

The truth is whatever the government ― the Big Brother ― says. The government rewrites history however it sees fit. If anybody has a different opinion or remembers history differently, the government will put him through a special rehabilitation program to change his or her mind, forcefully.

There are other brilliantly absurd dystopian works out there.

These absurdities are fictions only to a healthy civilized society when the government is decent. We can laugh at these fictions because they are entertainingly absurd and so far removed from reality.

But the farther down the hole we are from a decent government, the less fictional these absurdities become. In them lie the seeds of truth.

Whenever I think of Malaysia today, my mind wanders to these old dystopian science fictions. I sigh at the ridiculousness of our situation that might as well be the target of mocking and satire of these works.

Our very own Big Brother (is he Ah Jib Gor?) proclaimed back when 1Malaysia Development Berhad (1MDB) was established that the fund was the centerpiece to his transformation.

It would help to create a new financial center for Kuala Lumpur. It would help reform the power sector. It would push Malaysia into the dreamy First World list.

Drive by the long Jalan Tun Razak, you will read the pretentious phrase “For a Greater Kuala Lumpur” printed on aluminum hoarding surrounding the prime land 1MDB bought so cheaply from the government. “1MDB is strong,” the government said.

Today, financial troubles and corruption scandals beset the fund. The strong 1MDB now is in need of government support to survive. The financial center stands unbuilt. The power authority is scrambling to meet Malaysia’s future energy demand because 1MDB failed to build the necessary power plants despite winning the tenders. Amid all this, the government is trying to convince us all that 1MDB is too small compared to the Malaysian economy. “The fund is inconsequential now,” they claimed.

It took four to five years to change the storyline from it’s-a-big-thing to it-doesn’t-matter. One should be forgiven for not noticing the changing deceit told over such a long period.

But another episode is more shocking. Only a person of dulled senses and soft mind would not notice it.

Remember when all of those corruption allegations backed by various leaked documents implicating 1MDB, the prime minister and several other individuals first came out? They were tampered documents, the government said. The implicit defense was that the allegations were untrue.

Now, as the official government story goes, the money transfer did happen and the accounts did exist. All that was an all-legal multibillion-ringgit donation from someone unnamed. Suddenly, it was all true. Meanwhile, everybody who seems to be trying to right the wrong is arrested.

So, what about those tampered documents? The government is silent on that, instead preferring to talk about political donation reform, which by the way UMNO the ruling party itself rejected while blaming the Opposition for the reform failure. Such is the prevalence of doubletalk in Malaysia.

That blatant defense change happened in the pages of Nineteen Eighty-Four. The fascist party said “We’ve always been at war with Eurasia.” The masses nodded and they understood they had always been friends with Eastasia.

Suddenly at the same event, the party said “We’ve always been at war with Eastasia,” The masses were oblivious to the switch in name and nodded dutifully.

We have already that one party, the volte-face, a hint of corrupt bureaucracy along with the inane rationale and excuses today. It is up to us Malaysians to not nod lest Malaysia becomes these dystopias tomorrow.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
First published in The Malay Mail on August 7 2015.

Apart from the slowdown in consumption, I was wrong. The Malaysian GDP grew 4.9% from a year ago, considerably higher than what I thought it would be at 4.1%-4.2% YoY. Still, economic growth is decelerating quite drastically.

Malaysian GDP growth

Trade surplus did not improve as exports contracted worse than imports, and not the other way round as I wrote previously. Service trade and price factors have something to do with it since trade values published monthly had suggested otherwise. I had naively taken the number without taking into account export and import prices.

Meanwhile, investment growth crashed, becoming much weaker than what I expected. The Pengerang project has not created much dent yet.

But the two big things that caused me to miss the actual growth figure are inventories and government spending. I should have raised my inventory projection when the industrial figures come out respectably okay but the pessimistic me refused to do so. And I had expected with all the rage for deficit targeting, government expenditure would have taken a big hit (yes, I know the GDP government spending does not correspond exactly to actual federal government spending and there are other states’ government spending to account for). It grew in annual terms instead.

The thing that was really hard to get it wrong was consumption. The GST collected its toll. It was a stark slowdown, growing only 6.7% YoY after the 1Q15 8.8% YoY spike. Domestic demand growth decelerated to 4.6% YoY from 7.9% YoY in the same period.

A lot of people had expected a dip after the spike and they were right. The frontloading theory is right.

That has led me thinking about how much did consumers stock up on their foodstuff and other typical consumer non-durable goods. None of us has a warehouse to store a whole year worth of supplies.

This is a hard and important question. Whatever the answer is, it is the key to knowing when will spending normalization take place. When it happens, I think it is reasonable to expect a massive spike in consumption, at least on quarter-on-quarter basis.

If I had to guess, the normalization would probably start this quarter. We could see complete normalization by the end of the year.

Still, preempting the typical data for 3Q15, this quarter would likely be weak too and I feel we would only start getting better in 4Q15. The GST impact itself should be gone completely by 2Q16, if only because of mathematical artifact.

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