Categories
Economics

[2107] Of if you want your bonus, you should lose your job first

CUEPACS, labor union for civil servants in Malaysia, given current environment of large fiscal deficit and economic uncertainty, has the audacity to demand for bonus.[1] The demand is not met, as evident by absence of such bonus in the proposed federal government budget tabled nearly two weeks ago. Today, the Prime Minister rightly admonished — admonished awfully understates the situation since the PM said demand is “morally wrong” — the union in the process.[2]

As a taxpayer staring at the possibility of higher tax in the future, that demand clearly is impossible to meet. The large fiscal deficit due to combination of structural and cyclical factors must be tackled and at the moment, I would probably be grudgingly willing to suffer increased taxes if government spending sees reduction at the same. I however would like to see those who fail to pay their taxes be brought to book first before having to suffer from a tax hike, although that is a different issue that I will not delve farther here.

Returning to my point, granting such bonus will only increase the likelihood of tax increase without a reduction of government size, which is already bloated.

You know what?

If they really want their bonus, I can be amenable to that but only on one condition: a lot of civil servants need to lose their job. This means badly performing civil servants have to go through the door. I will not mind having high quality and productive civil servants, which definitely will mean smaller workforce, being paid good bonus.

The union is a vote bank. That is probably why it has the audacity to do this. In this case, its audacity comes at the expense of taxpayers. That is intolerable.

Money does not grow on tree, mate.

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

[1] — KUALA LUMPUR: Cuepacs wants the Government to pay the 1.2 million civil servants a two-month bonus this year.

It hopes the Government will include the bonus in Budget 2010 plus a similar incentive for 400,000 pensioners, said the umbrella body’s president Omar Osman. [Cuepacs seeks bonus of two months for govt staff. The Star. October 18 2009]

[2] — KUALA LUMPUR, Nov 4 — It is morally wrong to ask for bonuses while the country is still struggling to sail out of the economic downturn and people in the private sector are being retrenched, Prime Minister Datuk Seri Najib Razak said today.

”It’s morally wrong to ask for bonus when the economy has not recovered. I keep telling Cuepacs (president Omar Osman) that it cannot be just like a trade union, shout for bonus every time (there is budget) because you want to (remain) popular among your members,” he said. [Najib slams Cuepacs as ”˜immoral’ to demand bonus. Bernama. October 18 2009]

Categories
Economics

[2104] Of the government continues to expand under the 2010 federal budget

As a libertarian that I am, I can only sigh after reading the 2010 federal budget speech delivered by the Finance Minister.

I begin from a point deep in the realm of skepticism. I never actually believe any government in Malaysia — now or in the near future, neither Barisan Nasional nor Pakatan Rakyat — would largely retreat from the marketplace to leave the market to its own device in most cases. There are simply too many political considerations that go against the notion of free market here in Malaysia.

Firstly, businesses are politically-connected to make the government pro-business. In fact, the government itself is involved in businesses through its oligopolies to crowd out private initiatives. This has not even considered the erased line between the government and Barisan Nasional, where public properties are used for personal and political gain. For the government to touch itself openly is inevitable. That is the likely result in the case of conflict of interest, which is hardly surprising at all. There is no decency anymore these days.

Secondly is the developing entitlement mentality. Fuel subsidy is a right. Free highway is a right. Scholarship to universities abroad is a right. Bonus is a right. With such mentality and with both Barisan Nasional and Pakatan Rakyat racing on this front, government expansion is the only logical way forward. We have seen how the Islamization race between UMNO and PAS ended. It does not take a leap in imagination to picture the end result of the race between Barisan Nasional and Pakatan Rakyat to the left.

Early in the speech, the Finance Minister mentioned the scope of government intervention and it is wide. In his own words, the government ”will transform Malaysia through a comprehensive innovation process, comprising innovation in public and private sector governance, societal innovation, urban innovation, rural innovation, corporate innovation, industrial innovation, education innovation, healthcare innovation, transport innovation, social safety net innovation and branding innovation.”

That is a mighty goal, especially given that many governments perform poorly in the area of innovation when put head to head with the free market.

No matter. The government knows best and god saves us all.

Regardless of the budget, a new industrial policy that necessarily calls upon government intervention appears imminent. The talk of a so-called new economic model or really, a central planning exercise with new emphases has been going on for months now. Different goals, same paradigm.

The best symbol of paternalism available in the budget that a layperson can identify with is the proposal to charge an annual lump sum fee on credit cards. The Finance Minister claims that this is done to promote prudent spending. It is, as if, all individuals are doomed to spend all of their money dry.

Never mind that the government itself is spending imprudently. I wonder if an individual with his or her own money would buy a laptop priced at RM42,320. Whatever the answer, we know that some government institution has done that. Open up the auditor report. Year in and year out, it is the same old story. Yet, individuals have to suffer paternalistic attitude from a hypocritical government, which is convinced that individuals cannot manage their finance.

On the contrary, the government should really worry about its own financial status first rather than trying to tweak individual behavior, from savings to spending. Its revenue is going down and its expenditure is growing, the abnormal spending caused by the stimulus package notwithstanding.

The government seems to be addressing that problem by introducing goods and services tax later in hope to increase its revenue; not in 2010 but maybe in 2011. I personally like such consumption tax, but only if it neutralizes amount of theoretical loss due to income tax. To have both is to reduce welfare of individuals. Other than that, the government is even preparing to rents out some of its premises to the public, among other things.

The reform effort at the fuel subsidy regime is likely to help but it is unclear how that would be effective in rectifying government finance in light of expanding roles of government in the country.

The size of government expenditure — regardless whether it is caused by corruption, incompetence or by simply misguided conscience to help — needs curbing, if the problem of government finance is to be effectively addressed.

With a little luck, such retreat will give the private sector more space to flourish and contribute to government coffer, in the long run.

Yes, in the long run, we are all dead as Keynes wrote. Remember however that we are here now because of quick fixes — get the government to do it.

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 October 27 2009.

Categories
Politics & government

[1948] Of the next big step is a small Cabinet

Skepticism comes naturally with broken promises. Due to disillusionment among far too many individuals under the previous administration, the words of a Barisan Nasional-led administration are close to worthless nowadays. It is, therefore, not hard to prove that the window for sloganeering for the new Prime Minister is extremely narrow. What really matters now is action, and the first step in breaking that skepticism is by assembling a Cabinet worthy of trust.

The window for sloganeering should have been shut completely if not for the role of slogans in clarifying any agenda. While catchy slogans still have a place, the agenda must first be set straight and right. In this era of extreme skepticism, doing otherwise invites disaster.

Questions on the slogan will be raised and convincing answers will not be forthcoming exactly because the slogan lacks substance. That will create disappointment, reinforcing pre-existing skepticism. Mixing skepticism with further disappointment is a surefire recipe for cynicism.

Being a skeptic, it is not hard at all to turn myself into a cynic, especially with the mainstream media acting the way they do at the moment. The mainstream media — the major printed and broadcast media — are obviously oblivious to the reason why they lost their credibility in the first place. Their coverage of the three just-concluded by-elections continue to prove that they are nothing more than individuals typically found in the dark back alleys with scant ersatz clothing soliciting for clients of dubious taste.

So early in days of the new administration, there are little clues to the actual agenda of the new Prime Minister, save an unclear slogan with no concrete definition.

”One Malaysia”, for instance, is amazingly opaque despite the untrustworthy mainstream media parading the slogan as a sign of change. Change is not about slogans but the mainstream media would have all of us believed otherwise.

There appears to be some effort by the Prime Minister to elaborate on that slogan on a piecemeal basis but, so far, it is all wishy washy. It is there in the air, warm and fuzzy but nobody can really see it. The new Prime Minister clearly has not communicated his message well.

This has made his slogans open for a gamut of interpretations, making blowback a real possibility. Already ”One Malaysia” is seen by some as a repackaged Malaysian Malaysia, striking fear in the hearts of conservative Malays. On the other side, ”One Malaysia” suggests intolerance for civil dissents and a return to Asian values where unity is promoted at the expense of liberty.

In absence of clear message, one has to look somewhere else to ascertain the agenda of the new administration. The opportunity to do just that is coming with the expected formation of a new Cabinet. The size and the membership of Cabinet will shed light on some of the new prime minister’s agenda.

The size of the new Cabinet will indicate whether the same path of big, ineffective and wasteful government is the order of the day. Under the Abdullah administration, there were 33 individuals with a seat in the Cabinet by virtue of being ministers; there were 27 ministries of various kinds.

It is easy to digest how the number of the ministries translates into a big government. The greater the quantity of ministries is, the greater the requirement for civil servants. Tremendous resources are required just to keep a bloated government running.

A large number of ministries not only suggests the large size of government. It also suggests that the role of government is wide; wide enough to smother the life of private citizens, not only with respect to civil liberty, but also in the areas of business where multiple permits and licenses are required by different ministries, as each ministry tries to justify its existence.

At the back of my head, there is a nagging feeling that these ministries were created to satisfy political demand for positions and power rather than accommodating national needs.

At the very top, having 33 decision makers in the Cabinet makes the decision-making process cumbersome. In a country with limited empowerment as evident through the lack of local elections and in effect unresponsive local government, far too many decisions eventually go back to the top. When such top-down statist set-up is coupled with a cumbersome Cabinet, it is little wonder that the government is ineffective.

Adoption of organic — or bottom-up — approach can solve that problem. One example of that is by returning the power of local government to the people through reintroduction of local government.

With active local government, many functions of the Ministry of Housing and Local Government can be made irrelevant as the decision-making path length is shortened. Greater democratization itself can eliminate the need for the Ministry of Federal Territories completely.

Regardless of democratization, what exactly does the Ministry of Federal Territories do that the local authority, like the City Hall of Kuala Lumpur, cannot?

A new Cabinet must address the problem of big government that has been strongly identified with the past administration. The new administration has to forcefully break from the past. Or else.

Inevitably, that means embracing a limited but effective government led by a small but capable Cabinet.

Functions of ministries need to be streamlined to address the problem of overlapping turfs, ministries have to be merged to reduce the scope of government, and excess positions within the government need to be removed to address more than a decade-old fiscal deficit; the deficit is an indicator of the size of government.

These actions, to me, will produce a very strong signal indicating a change from the malaise Malaysia suffers. That will help in convincing me — and probably others, too — to cut down on my skepticism and to give the new administration a fighting chance.

Unfortunately, elimination of excess positions within an already bloated government might not happen. The mini-budget specifically called for absorption of the unemployed into the government. Past promises are tying the new Prime Minister’s hand.

Nevertheless, reducing the size of government cannot be done in a day. It has to be done in a gradual manner. Yet, gradualism is not a luxury the new administration can afford. Given the urgency and the gravity of the need for change, the only quick big punch to the prevailing skepticism relates back to the size of Cabinet and eventually, the size of government.

Size however is not the only consideration. The composition of the Cabinet is as important as the size. Still, even the question of composition necessarily leads back to the question of size.

The reason is that the pool of Members of Parliament available to the new Prime Minister contains a limited number of qualified individuals with intact credibility. A large Cabinet will more likely than not absorb individuals who do not command confidence from the public in times when confidence is exactly what the new administration needs badly.

If the new administration wants to earn confidence from the masses, a large Cabinet is not an option.

Having said that, it must also be stressed that a small Cabinet does not guarantee a smooth ride for the new administration. The size is a mere symptom of the agenda and a lean Cabinet only suggests that the agenda is on the right track. It says nothing of the agenda itself.

A failure to form a small cabinet will, however, make the years of the Najib administration a hell for Barisan Nasional.

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 April 8 2009.