Tag: Pakatan Rakyat

Categories
Economics Politics & government

[2682] Comparing manifesto-related fiscal deficit, sort of

I am curious at some of the projected fiscal deficit figures which have come out from the internet. A number of them are fanciful.

One that I have read has the deficit under Pakatan Rakyat manifesto rising to close to 12% of nominal GDP while BN would be as low as 4%. The 4% figure is really the number that is stated in the 2012/2013 Economic Report as published by the Treasury for the 2013 budget back in September 2012. This number was published much earlier than 2013 BN manifesto and I doubt the 4% incorporates most if not all of BN manifesto. So, citing the 4% is misleading. In any case, I have written how that 4% in fact is increasingly an incredible figure. I have in fact wrote about this at work as early as October 2012. It is just common sense if you know your stuff and have been monitoring government finance for some time.

First, I have a gripe on some of the numbers. Many projections appear to be based on 2012 nominal GDP figures. Obviously, any ratio based on that number will overstate the deficit ratio since the 2012 GDP figure will very likely be smaller than the 2013 GDP figure.

Second, some take the whole manifesto expenditure and lump it up in just one year when it is clear that many of those spending will be distributed across multiple years. Naturally, you will get a humorously humongous number if you do that.

So, I am annoyed. And to disprove those numbers, I need to produce one of my own.

I hate to disprove Syed Hussein Alatas but I am lazy. I am taking manifesto expenditure figures estimated by The Malaysian Insider and comparing it to Treasury’s 2013 nominal GDP figures. I am not fully convinced of the numbers estimated by TMI but like I said, I am too lazy to produce my own estimates. After all, these are numbers for my blog. If it were for work, I would be more diligent. So, the TMI is the best I have. In my defense, the TMI numbers do not suffer from the two criticisms I have listed down.

TMI has it that BN manifesto in the first year would cost RM12.5 billion while PR’s to cost RM25.6 billion. I do not know the assumptions behind it but I am taking it in good faith.[1]

The Treasury in its Economic Report projects the nominal GDP for Malaysia in 2013 to be slightly more than RM1.00 trillion.[2] The Treasury also projects a fiscal deficit of close to RM40 billion in 2013.[3] So, the base case has the fiscal deficit as 4.1%.

Taking a simple view that all manifesto expenditures are unaccounted for in the 2013 fiscal deficit, that would mean BN manifesto would increase the deficit to 5.4% while PR manifesto would push it to 6.7%.

As you can see, the numbers are less alarming than what political hacks all around have been brandishing. That is not to say those figures are acceptable and I am sure Fitch, S&P and Moody would stand up and yields to spike a bit but it is not the end of the world.

Now, the definition of first year is problematic because the winner of the election will have only about six months to implement their manifesto in 2013. Furthermore, the expenditure for 2013 has been set, notwithstanding possible additional unbudgeted spending that may come later in the year. Furthermore, the six months of 2013 will likely be months of firefighting for both sides.

Because of that, it is probably better to look at the deficit number in 2014 instead.

Now, let us say that the nominal GDP in 2014 would grow at its 2011-2013 growth average (inclusive of the 2013 projected figure), which is about 6.6%. That suggests the nominal GDP in 2014 would be close to RM1.07 trillion.

Let us also assume that the deficit stays the same at RM40 billion however unlikely that will be.

So under a base case scenario before accounting for manifesto spending, the 2014 deficit-to-nominal GDP ratio will be 3.7%.

Accounting for manifesto spending, for BN it might be 4.9%. For PR, it might be 6.1%.

Now, PR manifesto cost might be slightly overestimated. This is especially so because the TMI figures is a gross number. PR will likely institute open tender system more widely and that may reduce overall expenditure by a bit.

As for BN estimate, it is likely slightly overestimated given the base case because I would think some manifesto expenditure would have been included in the budgeted expenditure. Furthermore, some the MRT spending is a kind of contingent liability expenditure: it is “off the balance sheet”. It is just not included in the official deficit calculation.

And the revenue side has not been considered yet. But I am not going to do the revenue projection. After all, the purpose of this entry is to show that it is not the end of the world.

There is just too much uneducated fear mongering and I hate that.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
[1] — [Populist pledges weigh on Malaysia’s wallet, reports WSJ. The Malaysian Insider. April 30 2013]

[2] — [Gross National Income by Demand Aggregates. Economic Report 2012/2013. Malaysian Treasury. Accessed May 1 2013]

[3] — [Federal Government Finance. Economic Report 2012/2013. Malaysian Treasury. Accessed May 1 2013]

Categories
Economics Politics & government

[2675] The taxpayer’s deplorable options

I do consider the payment of income tax as a responsibility I must fulfill. As a member of society, I have some responsibilities toward its maintenance. The fact that I am a citizen makes that responsibility of paying taxes doubly important.

That responsibility arises from my enjoyment of multiple public goods that exist through public funding, never mind that its distribution may be less than ideal since only a minority of Malaysians pay income tax, and never mind that some public goods can be provided for through private means.

The provision of these public goods makes the sum of the income tax that I pay more palatable to me than being robbed on the streets or being swindled by a snake oil salesman. At least, I get something out of the money that I pay out even as there are cases of mismanagement or abuse of public resources by the government of the day.

While I do rationalize the payment of income tax and other types of taxes as such, that does not mean I enjoy paying those taxes. I dislike paying taxes and I especially dislike paying income tax as opposed to consumption tax. Sometimes, I do wonder how far we have progressed since the days of old when the fruits of one’s labor were expropriated by men — in the name of equality, as well as women — of power. Perhaps progress is the fact that tax rates today are lower than they were in times of feudalism. Perhaps, perhaps, perhaps”¦ I tell myself perhaps.

What is certain is that I am sensitive to the income tax rates that I face.

The tax rates themselves are linked back to government expenditure. That makes me sensitive to plans which lead to government expenditure growth.

Apart from my distrust in the government in guaranteeing my civil rights, taxation is one of the other few reasons for my skepticism of the expansion of the role of government in our society. It can hit my pockets, which is not as deep as those in power.

The upcoming general election provides me with an opportunity to assess the options that I have on the table. This election may be the first ever where Malaysians can choose which economic policies they prefer to see implemented.

There have been manifestoes written and shared before of course but the 2013 general election makes it most realistic to imagine a change in federal government, without any political exchange in the style of the failed September 16, 2008 (and by the stars, let there not be any).

Yet, the choices so far have been disappointing.

On one hand there is Barisan Nasional where despite all the sleek public relations exercises suggestive of change, it is still business as usual in too many ways. For one, abuse of public funds goes on as usual.

Just the other day, the deputy prime minister declared that children of workers of Pos Malaysia — a private company after it was divested away by Khazanah Nasional Berhad to DRB Hicom which is ultimately controlled by Syed Mokhtar Al-Bukhary — would be given free netbooks by the Malaysian Communication and Multimedia Commission.

This is the use of public resources to benefit private parties and this is only one example of abuse; Barisan Nasional has no qualms utilizing public funds for its election campaign.

Those kinds of abuse adversely impact government expenditure in one way or another.

The government in its 2013 Budget plans to embark on fiscal consolidation, which is admirable. Yet, plans are plans and it looks all the more incredible as each day passes by. Each day of campaigning is another day the government of the day embarks on economic populism that is funded by public funds in an abusive way to blow the fiscal consolidation plan apart.

On the other hand we have Pakatan Rakyat.

Pakatan Rakyat does offer a vision to address the weaknesses of the incumbent government. Considerable portions of its manifesto try to address monopoly in the private sector that was actively created by the Barisan Nasional government which is something I can support. Pakatan Rakyat’s proposal to increase competition in the automotive industry is also something that I and many have argued for.

Yet, Pakatan Rakyat’s plans to reduce fuel prices, water tariff and others through greater subsidies will demand expansion of government expenditure. That is of significant worry to me. This is especially so when it is clear that the government will require a structural change in doing things in order to lower the fiscal deficit.

Pakatan Rakyat’s plans appear to move the position of public finance to the opposite direction.

Apart from the plan for increased expenditure, the political coalition is averse to expanding the tax base in the form of introducing the goods and services tax to replace the pre-existing sales and services tax. What is all the more remarkable is that Pakatan Rakyat plans to reduce personal income tax.

With increased spending and reduced taxation, the deficit may increase especially if other sources of revenue do not increase fast enough. This raises more questions on the revenue side. Does Pakatan Rakyat plan to increase company taxes and other indirect taxes? Will a Pakatan Rakyat government look to Petronas — which is trying to invest in itself more — for more contribution?

Second Finance Minister Ahmad Husni Hanadzlah claimed that Pakatan Rakyat’s plans would nearly triple the fiscal deficit when compared to 2012 level when compared to nominal GDP and increase government debt level by 10 percentage points to 62 per cent of GDP.

Now, it is election time and his claim should be taken with a pinch of salt. Nevertheless, the direction of change in those figures as suggested by the minister appears reasonable. It does not take a person with wild imagination to think that the fiscal deficit and the debt level under Pakatan Rakyat’s plan will increase.

Pakatan Rakyat itself has not sufficiently clarified how it plans to do all that it promises without increasing the deficit. Its 2013 national manifesto is quite silent on the combined impacts of greater expenditure and its revenue plan on public finance. Pakatan Rakyat supporters have at one time or another claimed the Pakatan Rakyat government will curb corruption and leakage so much that it will allow a scenario of greater spending and unchanged taxation. While I am impressed with Pakatan Rakyat’s commitment to an open tender system for one, I am skeptical that those leakages and corruptions will be easy to tackle and if it is successful, it will release sufficient resources to plug any financial gap.

I ultimately do not believe heightened fiscal deficit and debt level will be sustainable to maintain a good standard of public finance. Economic forces are bigger than either Barisan Nasional or Pakatan Rakyat and I think when both parties are free from populist pressure and faced with the stark reality of public finance, they will tend to do what is responsible.

So if Pakatan Rakyat does get the opportunity to govern Malaysia and run its plans, sooner or later it will likely have to make room for realism with regards to its tax promises or its spending-related promises. Unfortunately, more often than not, raising taxes is far easier than cutting expenditure.

It is within this context that I consider Pakatan Rakyat’s words on taxes to be as incredible as the Barisan Nasional-led federal government plans for fiscal consolidation in 2013.

As a taxpayer, I am staring at my deplorable options.

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 Malaysian Insider on March 15 2013.

Categories
Politics & government Pop culture Society

[2666] From race and religion to Psy

For better or worse, quantity is important in a democratic contest. It is about gaining the majority. It is about popularity.

With that as the context, we have to remember we live in a young society. The Department of Statistics estimates that the median Malaysia age in 2010 was slightly above 26 years. In simpler terms, the age of one half of the population today is younger than the median just three years ago. The profile of the Malaysian electorate pretty much reflects the demographics of our society.

Thanks to their sheer size, those in their 20s and 30s are clearly the biggest and thus the most important group. If they had one mind, they collectively could decisively determine the path which the country would take.

But what makes these young people stand out further politically is that most of them will be voting in a national election for the first time in their lives. Their minds more flexible than those belonging to the older generation who more often than not are hung up on legacy issues. Ibrahim Ali, for instance, still has the May 13 incident as his talking point.

So, young adults are the cool kids on the block and the two nationally-relevant political factions are competing to be the friend of these cool kids. The Barisan Nasional-led federal government has launched several policies for that purpose and chief among them are affordable housing and other cash transfers. The federal opposition Pakatan Rakyat promises the same young adults free tertiary education, among others. Both sides are pulling out all stops to be the one special friend.

While I find many of those policies too populist, at least those policies are serious in the sense that they affect a person’s welfare. The existence of a real policy competition between two credible sides is heartening since previously, it was really all about the old, stale, suffocating issues of race and religion. That is not to say that race and religion are no longer factors but at the very least, we have something substantive to base our election on.

But I do have a feeling that the courting is starting to go a bit too far and starting to appear regressive. It is starting to go into the realm of the trivial that debases the very serious nature of our elections. In an effort to become ever more popular, political parties are starting to make entertainment the focal point of their political events, instead of what the parties stand for.

This happened in Penang recently. Barisan Nasional organized its Chinese New Year celebration with Psy, the Korean sensation — and not the Malaysian prime minister — as the star of the event. The hosts of That Effing Show — a sarcastic online talk show focusing on Malaysian affairs — were right on the money when they joked that in the United States, a singer would introduce the president to the crowd but in Malaysia, the prime minister introduced a singer. Such is the office of the prime minister which is obviously too engrossed in crass populism.

While I despise the debasement of the highest political office of the land, I think I understand the reasoning behind it. Young adults are seen wedded together with pop culture. They are the pop culture.

Maybe, just maybe, the politicians think, if they could harness the power of pop culture, if they could show that they have their finger on pop culture, then they could connect with these young adults. We could win their votes, so the politicians thought. At the end, these politicians hoped what happened in Penang stayed in Penang (Tourism Minister Ng Yen Yen had a different idea in Malacca, some weeks after).

But this line of thinking — of entertainment, young adults and politics — is potentially insulting to young adults. Is entertainment the thing that matters the most in attracting them to participate in a political process? Are young adults fluffy-headed, uncritical, naïve voters to be wooed with inconsequential gimmicks? Is the future worth a trivial song in an age where one-hit wonders happen almost every week, if not every day? I pray to the god in the mirror for the answer to be no.

I know it did not work in Penang but I do not know if it will never work. I hope that it will never work so that our elections have less possibility of becoming an exercise of triviality. The truth is Barisan Nasional is not the only one guilty of putting entertainment at the center stage or a big part of a political event or rally.

The danger is that if it works and pulls in the votes. When that happens, there goes the future as votes of substantial value are traded for a trivial piece of song popular with the cool kids.

If it does happen, that will be no progress from the days of race and religion. It is just as bad as the days of old.

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 Malaysian Insider on February 28 2013.

Categories
Politics & government WDYT

[2374] If held today…

If held today, what would you expect the result of the Malaysian federal election be?

  • BN government, two-thirds majority or more (19%, 5 Votes)
  • BN government, less than two-thirds majority (35%, 9 Votes)
  • Hung parliament (19%, 5 Votes)
  • PR government, less than two-thirds majority (19%, 5 Votes)
  • PR government, two-thirds majority or more (8%, 2 Votes)

Total Voters: 26

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This is a relevant question, given that some expect the election will be held in the next few months. I of course do not pretend that these polls are scientific. It is all for good fun.

Categories
Politics & government

[2357] A little less conversation, a little more action please

It is easy to dismiss any grand statement made by PKR nowadays. This is not at all unreasonble, unfortunately. PKR has a reputation of boasting to either boost its members’ morale or to attain higher ground while negotiating with other parties, allies or foes alike. Its claim that there would be a change of federal government on September 16 a few year ago is the epitome of they are capable . What happened in Sarawak solidifies PKR’s dented reputation. Now, PKR Selangor is stating that it is it is confident of winning two thirds majority in the state.

Whether that confidence is grounded in reality or in the clouds, I think it is wise for them to not make any claim colored by exuberant confidence any more. Talk is cheap and a person’s reputation can only suffer so much.

For the party to be taken more seriously, it needs to repair its reputation by proving its capability, rather than talking it up only to have the balloon pricked by a pin. By doing more and talking less, perhaps the party can build up its fast depleting reservoir of credibility. PKR needs to do this quickly because the gap in its reputation is substantial.

Although PKR is becoming a laughing stock each time its leaders open up their mouth — observe their justification for their selfishness in Sarawak; while the breakthrough is encouraging, the overall result is disappointing and the denial is astonishing — this is no laughing matter for those who believe in competitive democracy.

PKR is an important component of Pakatan Rakyat. For better or for worse, it is the leader of Pakatan Rakyat. As a leader, its reputation reflects the whole pact. PKR should not abuse its reputation as it is abusing right now. That is most unfair to other members of the pact.

Furthermore, in a country with history rich of opposition coalition breakup, the solidarity of Pakatan Rakyat should not be taken for granted by PKR. An asset can become a liability. There will be a point where PKR stops becoming an asset to other members of Pakatan Rakyat.