Categories
Politics & government

[2941] Ismail Sabri does not deserve 100-day honeymoon

In his speech revealing the Cabinet line-up, Prime Minister Ismail Sabri Yaakob said each ministry had to prove their early achievements within 100 days. He said that after stressing the Cabinet needed to have short and long-term plans.

That 100-day period might have been acceptable under normal circumstances. And it might be acceptable, if the Cabinet had a new line-up.

But this Cabinet is the same as the last one that failed miserably, with minor changes inspiring no confidence. The clueless Minister of Education is still the same. Ditto for MITI, and almost all other ministries. One improvement might be the promotion of Khairy Jamaluddin to the Health Ministry, but this could be negated by the silly switch: the ridiculous former Health Minister now takes over Khairy’s old portfolio. The health ministry under Adham Baba had been the source of dark comedy since March 2020, and only god knows what the Ministry of Science, Technology and Innovation has in store now. Good luck all the technologists out there.

So unchanged the line-up, that it is impossible to divorce the failure and incompetence of the previous Cabinet from the new one. The Prime Minister himself is the source of the current Covid-19 wave with his lack-of-quarantine mistake.

The largely disappointing line-up does not deserve space to breathe. This government does not deserve 100 days. They should be judged now. They must be put under pressure.

For heaven’s sake, there is an ongoing pandemic and we just do not have 100 days.  Thousands have died. If this government needs 100 days more, then we collectively as Malaysians have made a mistake and will pay a heavy price for it.

Categories
Economics Politics & government

[2940] Immediate fiscal agenda for the new (old) government

The next finance minister is unlikely to be thinking too far ahead since election is just less than 2 years away. It is short time to set any long-term agenda. There will not be enough time for learning and there will not be enough to start implementing. For the most parts, the new finance minister will likely be carrying on with established policy until the general election is called. Even if he or she dares introduce new long-term measures, there is a good chance it would be overturned once a new minister takes the Level 12 office in the Treasury Building in Putrajaya after the election.

Nevertheless, given the situation we as a country are in, the 2-year period is important. I think there are two items of concern during this period that could affect the long-term fiscal policy of the country:

  1. The 2023 fiscal cliff
  2. Fiscal consolidation.

The Perikatan Nasional government that Umno was committed to a quick fiscal consolidation exercise that necessitates a 2023 fiscal cliff and I think there is a question whether the same policy would be taken up.

What is the 2023 fiscal cliff?

To handle the Covid-19 crisis, the government changed certain law that allowed it to practically have a current deficit. Without the changes, the government’s current balance must always be in surplus, or in balance. In other words, total revenue must exceed all operating expenditure. Here is a restatement of: the government can only borrow for investment purposes (or in public sector jargon, development expenditure).

More specifically, the government created a Covid-19 fund that officially neither operating or development expenditure (but in fact, mostly operating expenditure). It was a necessary accounting trick that bends the law. Revenue dropped substantially during 2020 and 2021 relative to previous immediate years, while the need for spending rose dramatically. If the laws were not changed, we would have faced a worse version of this already bad recession. Even so, actual spending done was insufficient (the comic I drew below) due to the then policymakers’ naïve belief in V-shape recovery, and failure to adopt precautionary approach. This was the costly mistake of Budget 2021.

This fund is set to expire on December 31 2022. Upon expiry, the normal way of doing things—current balance cannot in deficit—becomes the rule again. This means any borrowing must be repaid (or from what I am seeing, I suspect it would be absorbed into development fund despite a large chunk of it is not developmental in nature. The 2020-2021 RM21 billion drop in Covid-19 is almost as large as the sudden RM19 billion increase in the corresponding development expenditure).

Based on Ministry of Finance publication, the fund had RM17 billion in it as of end-June 2021. It is likely higher given additional spending announcement made during the quarter. Expiry would mean (assuming it is not reclassified lock, stock and barrel as development expenditure) paying off that RM17 billion to meet the current balance requirement. It could also mean a percentage point worth of government spending unmade if it is paid off. That RM17 billion is roughly equivalent to a percentage point of 2021 deficit ratio.

So, if the fund expires in 2022 and the borrowing gets paid off (instead of reclassified as development expenditure), there will be a fiscal cliff: a stark drop in spending, which would take some steam off GDP growth, and more importantly, recovery.

Remember, economic recovery is not merely about growing again after a recession. Neither is it just about returning to pre-crisis level (which by the way, we are a risk of not doing so in 2021). A comprehensive recovery is one where current level would match the level it would be if no crisis had happened. Our insufficient spending had left the gap big, and catching up with that pre-crisis level and trend is hard.

Inappropriate time for fiscal consolidation

This is on top of fiscal deficit-to-NGDP ratio that the government might target. It is unclear now what the deficit ratio target is. Former Finance Minister Zafrul Abdul Aziz had stated that the figure for 2021 after accounting additional unplanned Covid-19 spending could rise to 6.5%-7.0% of NGDP, from the unrealistic Budget 2021 projection of 5.4%. It is unclear if this accounts for lower-than-expected GDP growth. If it does not, it will go higher.

If the new government (if it could be called new given the composition is… the same) insists on fiscal consolidation still, there will be pressure to let the Covid-19 fund expire while cutting services to keep spending under control.

Two immediate agenda for the next finance minister

Malaysia is clearly behind the curve by a big margin in terms of economic recovery. Getting recovery on track is the immediate concern. Unfortunately, as much as I hate to say it, the government is likely the main driver of growth in these times.

The government can start playing that role properly by first, extending the expiring date for Covid-19 fund and second, postponing any fiscal consolidation exercise. The second can be done by maintaining deficit ratio high, possibly in the range of 6%-8% in the next several years.

Ideally, this should followed by a long-term agenda of tax reform to increase government revenue, which the Pakatan Harapan government, and the previous Perikatan Nasional government, as I understand it, was willing to go ahead with parts of it.

Categories
Politics & government Society

[2939] A unity government is a chance to rebuild trust among Malaysians

I prefer Pakatan Harapan to be the federal government. The 2018 general election gave the coalition the democratic mandate to be so, and there are plenty of reforms left to the completed. I know many are disappointed with the pace of reforms under the previous Pakatan government, as well as the incessant infighting. But as far as reforms are concerned, it is a long term project. It definitely cannot be done within less than two years. To expect so is naïve and unrealistic.

But my preference is an ideal, which must face the unattractive options in the real world. Realistically, only an election would reshuffle the deck, and allow Malaysia to start afresh. But a general election is out of the question for now. We have to live with our bad hands, instead of insisting of holding the cards that we do not have.

The red line

The likeliest of all options on the table seems to suggest Umno back at the driving seat. Meanwhile, Pakatan lacks the seats to form the government, and an earlier option of that happening one involving working with the criminals of 1MDB. Both options push up the possibilities of 1MDB criminals and their collaborators escaping justice. That is the red line for me.

Yet, Umno’s road to the Prime Minister’s Office is not as smooth as initially expected, with Bersatu imposing conditions, which dissatisfied the Agong. That happened today or yesterday. The condition Bersatu imposes is the same red line I have: no Najib and his merrymen.

Given the political impasse (and before it gets solved with Najib as part of the power broker), the anti-1MDB force from Pakatan and all other sides should come together as a unity government. That unity government would have access to the best talent among the 220 Members of Parliament (there are few despite the big number) while locking out 1MDB men from power.

The additional benefit of unity government is a chance to rebuild trust among Malaysians, which is the reason I am writing this post.

Political elites, groups and values

When we discuss contemporary Malaysian politics, inevitably there will be a charge, with a resignation tone, that the political elites are serving their interest alone.

That is hard to deny, but it is an incomplete assessment of the situation. The truth is, the political elites do represent groups holding on to certain values. We live in a representative democracy, however imperfect it is.

These values differ across groups: upper middle-class urbanites in general hold on to certain values (and interests) they do not share with low-income Malaysians. There are other dimensions to consider: religion, ethnicity, geography, class, etc.

So, political elites are manifestation of the masses.

Distrust among us

We are at the point where trust between these groups is low. It has been low for a long time, and it interacts with other factors like our trsut in our institutions. The trust deficit in our institutions, I would argue, is partly due to lack of trust among us (I would like to add that I am writing a book and a chapter of the book explains this is greater detail).

There is a metric we could use to understand the state of trust in our society. The World Values Survey has a set of questions assessing trust level in a society, and it has been measuring Malaysian level since the 2000s. Well, three times: 2006, 2012 and 2018.

One out of several relevant questions has it, “would you say most people can be trusted?”

The question approximates trust level in Malaysia. In 2006 and 2012, about 9% of Malaysian respondents answered yes in both years. In 2018, it rose to 20% but there is every reason to believe post-election euphoria had a role in pushing the rate up. Regardless, the suddent jump, that is a pretty low percentage. In other countries as recorded in the 2018 edition, the rates typically fell in the 30%-60% range. In Thailand, 29%. In Singapore, 34%. In Japan, 34% too. In the United States, 37%. In Sweden, 63%.

There are of course other countries with even lower trust than Malaysia, but that should not be our goal.

An avenue to rebuild trust

With that in mind, and that the political elites (more specifically, Members of Parliament) representing groups of different values, a unity government here is chance to bridge the gap between different Malaysian groups.

Theoretically, a unity government should bring about a more cooperative environment to groups at loggerheads.

Yet, I am under no illusion such unity government would work in such a way. The gap seems wide that it that building a bridge sounds like a hopeless exercise. Yet, we have to at least try to rebuild that trust. And a unity government provides such opportunity under a democratic system, however low the odds are.

Categories
Conflict & disaster Personal Politics & government

[2938] From political to personal

Favored mindless slogan among Pas, Bersatu and Umno members and supporters early during the incompetent handling of the pandemic had something to do with politics. Despite the deeply political nature of the whole situation, they would say “jangan berpolitik.” That roughly translates into “don’t politicize the issue.” Do not politicize Covid-19. Do not politicize the handling.

They repeat the phrase while politicking, and eventually causing the state-wide Sabah by-election. Coupled with uneven enforcement of physical distancing, we are here today: a nearly collapsed healthcare system and continuing rising number of infection cases.

Failures in managing the case, and actions worsening the situation persisted, amid the mindless slogan: don’t politicize the issue.

Hafiz Noor Shams. Some rights reserved

My grandmother died in her bed six days ago, a day before Eid. Initially, everybody thought she died of old age. She died in her sleep. Her death was shocking, but she was old. And she had a good life.

Post-mortem at the hospital revealed she had Covid-19.

She was unvaccinated. I am unsure why. I am just angry.

I could not go to her burial. I have not met her for nearly two years. No, too late. I had not met her.

Hafiz Noor Shams. Some rights reserved

Five days after her death, I received by second Covid-19 vaccine jab. A slot I had to fight for. Such an inequity, created by an unscientific hunch.

Hafiz Noor Shams. Some rights reserved

I am sure my experience is not unique. With nearly 8,000 deaths and counting, everybody must have known somebody who has died.
I wonder how they feel. Do they feel all those incompetence, mismanagement and failures political? Is 3-day quarantine political?

Is death of a family member political? Or is it personal, meant to be grieved privately?

Are these killings political, or are they a private matter?

Hafiz Noor Shams. Some rights reserved

It must be politicized. It is the only way to make irresponsible, incompetent and unaccountable men and women of this government accountable.

Categories
Conflict & disaster Economics

[2937] Premature fiscal consolidation influences our vaccination strategy adversely

Our vaccination program is taking the big solution approach. Since the Covid-19 pandemic is a big challenge, it might be natural to come up with a big solution. Mega vaccination centers are a critical part of the program. Big space with hundreds if not thousands of personnel vaccinating hundreds if not thousands more individuals. Big, shinny glittering, big. It is as if Mahathir of the 1990s is back.

It has been a slow painfully slow start with some big mess made along the way, but the program is picking up steam. Vaccination pace is still below what is required but we are getting somewhere: on June 10, approximately 155,000 dosages were administered, and close to 10% of the population has received at least one dose of Covid-19 vaccines.

Behind the headline numbers, stories are appearing that people are not showing up for vaccination despite registration. The authorities at first tied the no-show to vaccine hesitancy. Earlier rationale for separating Astra-Zeneca vaccines from the main public vaccination program was based on the understanding that the public distrusted that particular vaccines. After all, AZ had bad press for some time.

After a while, that rationale is starting to become weak, especially given logistical concerns on the recipients’ side. More and more, it sounds like that particular claim was based on a misreading of incomplete data, and hasty conclusion. The kerfuffle between the Selangor state government and the federal government regarding total dosage the former received, for example, does not inspire confidence in the analytical skills of those in power in Putrajaya. Hesitancy is a big problem, but it is becoming clear that it had been used as a catch-all excuse to brush aside other big problems faced by the vaccination program.

To me, the no-show cases and the government’s preference for the big approach raise a question regarding our vaccination philosophy: are our methods primarily designed to be the easiest for the central authority to deliver the vaccines, or for individuals to get vaccinated?

The first part of the question—is the method easiest for central planners?—has the program administrators firstly in mind. If the administrators are the primary focus of the process, then having big centers is the way. This is because the big approach pools resources and rides on economies of scale. Pooling makes the vaccination program cheaper for the side managing it. Also, easier. The big approach necessarily means having few centers. And having fewer centers means the logistics becomes simpler, given all else the same: manage 3,4 or 5 big centers is significantly less complex than dealing 30, 300, or 3,000 spread across wide geography.

The second part of the question—is the method designed to be the easiest for individuals to get vaccinated?—puts potential recipients as the primary focus. It makes it easier for individuals interested in vaccinating themselves get vaccinated. Instead of having to travel from one part of the city to the another, or worse, having to travel from one part of the state to another (which is common enough), a person would be able to get his or her dose from the neighborhood clinics, hospitals, public halls or anything that could function as a vaccination center. This path is more expensive compared to other approach because it is more complex: it requires hundreds or thousands of small vaccination centers all around the country. It will involve resources being spread as widely as possible. But it is easier for potential vaccine recipients.

So, why did we choose the big approach, i.e. the method easiest for the central planners?

There might be multiple reasons behind that. I suspect one of them is related to cost consideration.

This goes back to the November 2020 when Budget 2021 was tabled in the Parliament. In that Budget, the government of the day in all its wisdom decided to embark on fiscal consolidation immediately. That policy was made based on rosy assumptions: the economy was to experience a V-shape recovery as soon as possible. Things would return to normal soonish.

That consolidation plan has gone awry. Recovery, if it could be called as such, is proceeding slower than what the government expected. When the budget was unbelievably passed despite it grave flaws in December 2020, Malaysia was still in recession. In fact as of the first quarter of 2021, the country was still in recession.

Since then, the government has been spending additional resources little by little, but not enough to solve the pandemic problem comprehensively. It has been reactive as the crisis develops, always one or two steps behind, almost ways coming short to the challenge. With available resources limited by the badly designed Budget 2021, those planning for vaccinations had to resort to the big approach: pooling resources, economies of scale, cheaper method. They had to minimize the monetary cost.

That comes at a (different) cost of course: it makes logistically hard to some individuals to get to the vaccination centers. Some is an understatement as we race toward herd immunity. The big approach contributes to the no-show cases: no-show because the big approach needs the people to go to the central planners, instead of the central planners coming to the people. All this raises the risk of Malaysia failing to achieve herd immunity as soon as possible, and letting the economy to muck around longer.

In short, the premature fiscal consolidation planned by this government had influenced our vaccination strategy adversely.