Addressing Malaysia’s Budget 2010 to Malaysians

I believe, by now, most of us have read properly what have been presented by our Prime Minister yesterday in regards to next year’s budget. Full budget speech can be read here.

The summary of the budget as per his presentation:

To implement the three strategies and measures that I have tabled, the government proposes an allocation of RM191.5 billion for the 2010 Budget. This is 11.2 per cent lower than the revised allocation of RM215.7 billion for 2009. Of the total allocation in 2010 Budget, RM138.3 billion, or 72.2 per cent, is for Operating Expenditure and RM53.2 billion, or 27.8 per cent, is for Development Expenditure.

Under Operating Expenditure, RM42.2 billion is allocated for emoluments, RM20.8 billion for supplies and services and RM73.9 billion is for fixed charges and grants. A sum of RM524 million is provided for purchase of assets and the remaining RM800 million for other expenditures.

As for Development Expenditure, a sum of RM25.4 billion is provided for the economic sector to support the needs of infrastructure, industry and agriculture as well as rural development. A sum of RM20.3 billion is allocated to the social sector encompassing education and training, health, welfare, housing and community development. In addition, RM3.7 billion is for the development of the security sector, RM1.8 billion for general administration and RM2 billion for contingencies.

The Federal Government revenue in 2010 is expected to reduce by 8.4 per cent to RM148.4 billion, compared with RM162.1 billion in 2009. Taking into account the estimated revenue and expenditure, the Federal Government deficit in 2010 is expected to be in a better position at 5.6 per cent of GDP compared with 7.4 per cent in 2009.

 By the way of the summary given, with expected revenue only to be RM148.4 billion with an budegeted expenditure of RM191.5 billion, government will be spending more than money coming in. From a business point of view, this will be considered as a loss. However, government is not a business entity. It is their responsibilty to manage the nation. Building the nation? The government need Malaysians to be part of it.

In other words, my concern is how does this budget will give impact to Malaysians as a whole during the implementation of the budget. Will there be lots of “Little Napoleans” along the way? Will there be faces that will squander people’s fund? How many of ths large chunk of fund will make life much easier for most of Malaysians?

DS Najib and his team has presented the budget. At the very least, he does not plan to fail. If the budget fails to improve the nation, I would say that is up to Malaysians as a whole, starting from the government officials till the very last end of the chain.

Speaking of which, I’ve been hearing and seeing government servants hoping for 3 months bonus, or something like cash rewards. I know that they have been hoping for it as tehy have been seeing some of their friends have been getting bonuses for the past years and unfortunately they themselves don’t.

For this one, I have to say it is up to each of government servants’ thinking. For me, I have to say that I can understand the “pain”, but do consider some elements of being government servants and being private sector “survivor”. At the very least, in the brink of difficulties, government servants still have job to do. Where as for private sector, they have to survive with whatever they have. What have been see with the bonuses actually have clouded those who have been in unemployement or pay cut.

And one more, even though quality of service have been improved in some parts, still, some don’t. As for such, private sector cannot afford to provide poor quality service. Government? Poor service or not, Malaysians have to bear with it. Fair? With such difficult times, I do hope government servants can understand the situation.

Let us make the budget works for the betterment of ALL MALAYSIANS. As I said earlier – If the budget fails to improve the nation, I would say that is up to Malaysians as a whole, starting from the government officials till the very last end of the chain.

What say you?


3 thoughts on “Addressing Malaysia’s Budget 2010 to Malaysians

  1. By the way of the summary given, with expected revenue only to be RM148.4 billion with an budegeted expenditure of RM191.5 billion, government will be spending more than money coming in. From a business point of view, this will be considered as a loss. However, government is not a business entity. It is their responsibilty to manage the nation…

    Well this aint new. The Government has been spending more than it earns for the past 30 odd years. So if you spend more than you earn, you incur debt. And you have to pay interest on your debt. In 2008, it amounted to RM 12+ billion. The total contribution by the GLCs to the Govt coffers (including Petronas and all) was RM 32 bil, so almost 40% of all the dividend the Government receives has to go to settle Interest payment.

    And by running another deficit, this number is going to just keep going higher. I have been interested in trying to do a posting on this but have been sidetracked by various side issues.

    The problem really is that the deficit is structural. So in order to support all the subsidies, the civil service, support the state Governments, pay the pensions and pay the interest, the Government will invariably spend more than it earns. Well – out of curiosity, how long do you think it will take for the Govt debt to reach half a trillion? 5 yrs, 10 yrs, 15 yrs?

    So what will be the effect of all of this. Number 1 more debt means a worse credit rating. Number 2 a worse credit rating means higher interest payment. Number 3 higher interest payment means more debt. Number 4 – return to Number 1.

    We are not like the United States. The USA can run a USD 12 trillion deficit, yet they can borrow at ridiculously low rates. We have to ukur baju pada bahu sendiri.

    I think the tipping point is at a debt of RM 500 billion. Interest on debt at that kind level should be something like 5-6% minimum, that means RM 25 – RM 30 billion to pay interest. Thats about 75% of the current profits Petronas gives the Government.

    So essentially we are taking profit from a strong well run company (i.e Petronas) and using to support an over bloated , cost inefficient structure. I am not being politically correct here – I am just being honest and straight to the point. That cannot create new wealth for the citizens, especially the Malays. Its common sense – you take RM 1000 from a strong Malay GLC and you give it to a weak entity. So the strong GLC cannot reinvest the capital to lets say explore new production fields, upgrade their equipment, pay off warlords (:-), and the weak entity employs more people and gets more cost inefficient.

    Remember tipping point at a debt level of half a trillion. How close or how far are we to it..


    ODS: It has been quite some time since your last long, intellectual comment here WJK. And yes, I do understand that various side issues have sidetracked you from keep postings your point of view on our economical structure (especially in related with long-look-a-like-never-ending-argument between you, Piggy Singh and Parpu). And without denying, I admit your articles are straight to the point and made your readers think (especially for those who understand economic language :)).

    Nevertheless, it is indeed made known to us that the government has been spending more, especially during bad times to stimulate our economy.

    Perhaps, for us, what made known to us are the amounts that will be incurred in total. The total actual spending in current time might differ from what is actually spent.

    For example, the guarantee scheme made by Syarikat Jaminan Pembiayaan Perniagaan amounting to RM10 billion. That RM10 billion announced are in the form of guarantee. Yes, RM10 billion is the amount, but by way of structure, loans approval and recovery (either in form of schedule repayment or litigation, etc), do you honestly think that government is really spending RM10 billion in cash term right now?

    Refer to this news. It stated that:

    “The guarantee cover for this scheme is 80% by the Government and the balance by financial institutions.

    Applicants must be legally registered Malaysian-owned companies from all sectors of the economy with a minimum financing limit of RM50,000 and a maximum of RM10mil for each company.

    The Industry Restructuring Loan Guarantee Scheme is open to all companies regardless of the amount of shareholder equity.

    But for those with shareholder equity of more than RM20mil, the Government would provide guarantee of only 50%, and the balance would be by financial institutions.”

    With the already set pre-conditions, don’t you think that the RM10 billion apart of last year’s stimulus package has been really spent in form of cash? And do bear in mind, out of RM10 billion guarantee approved, will it be all 100% companies that applied the guarantees will fail and wound up?

    I bet you are much knowledgeable in economics than I am.. and I must believe that you have heard of how structuring and re-structuring debt and payments play some role in financial plans. Plus, I sense that you have in depth knowledge on how financial institutions works more than I do.

    And I also believe, in such presentation, net present value (NPV) of fund also being taken into consideration too. Speaking of NPV, I have not heard any of those terms in Budget speech.. yet.

    Well, this is my thought, which based on what I have learnt and read. It would be foolish indeed if no structured financial factors and plans being taken into consideration.

    And we still yet to know the outcome… as the figures are just budgets.. not totally 100% being cash outflow.

    Anyway, thanks for your comments. It is a pleasure to know that you still drop by at my petty blog. 🙂

  2. Hey ODS,
    Your not a petty blog – your views are representative of quite a lot of people, and the benefit you have is that you are articulate those views very well.

    As to the guarantee scheme, yes I did see it some statistic – (I downloaded 100 files from BNM to settle a score) and thats a separate story.

    The guarantee is a provision, and will appear as a “liability” on the Govts. balance sheet, but as long as the guarantee is not invoked, its still offsetted by cash on the asset side. The total Govt gurantees I think are a couple of hundred billion RM – have to find which data file its in.

    NPV is a solid concept – heck if you run NPV on most mega projects, the number turns negative.

    What I am talking about – the defecit is real money. Real money that the Govt has spent and continues to spend. Right now its a hunch – usually to prove it, it’ll take a couple of days to link all information together. But its a hunch that the deficit is real.

    Well don’t hear from me – hear it from the xperts

    (PS: I did not know of this until I responded to you the 2nd time, but it comfirms what I said.)

    The thing to note is that this generation everybody <35 (meaning the little kids especially) will face the brunt of this unsustainable system. But I believe, KJ can solve this problem maybe when given the chance in 10 yrs time.

    ODS:Thank you for your comment WJK.

    Whatever replies made by me are those within my knowledge and ability to find the data at the moment of reply. However, you never failed to impress me with such research and data you provided.

    Nevertheless, for the guarantees made by government, surely it has reach really big numbers. And by your concern, I understand your argument on the guarantees is based on the worst case 100% failure of repayment by those who applied the loans (which is very unlikely to happen). And yes, the numbers still be appearing in the statements, no matter how much real cash is concerned.

    However, do bear in mind. These guarantees have terms and conditions. There must be a preset conditions that should make the Financial Institutions to be more responsible in providing the loans. It would be meaningless if no proper control being incorporated in providing and guaranteeing the loans. And I can assure you, if there’s no proper control, independent audit review will tell us (perhaps the PKFZ case can be somekind of an example).

    And I also understand where you are coming from – deficit in real cash term. Correct me if I am it because with all such mega projects, why government having deficits instead of making profit..right?

    Well, this is where the trivia is.. should government making profits? Is it okay for government to make profit? What will people say if government is making profits out of those mega projects? There are some difference when government run the projects by themselves or privatising them. Profit made out from privatised government projects have different impact from profit made by government run projects.

    I believe by way of such argument between you, Piggy Singh and Parpu, you have a facebook account..right? I was told by a friend that there is an game application named “Nations”, whereby you make your own decisions based on issues given. It is just a theoretical game and just simulations. The issues can be the crappiest thing you will ever hear, but to me, no surprise because we are not at a place where we can hear crappiest complains that could come from real life.

    However, such decisions made will have impact on some key elements within the nation of yours. And believe me, I’ve seen the game played by my friend, and it is hard to get positive figures/percentage for government’s wealth (but the citizen’s wealth easily can be positive). Perhaps readers who have a facebook account can try to run your “own country” in the application. Try it, and you’ll get what it meant trying to get a very much stabilized nation.

    Whatever it is, I do hope that the wealth of Malaysia will be managed intelligently. Of course, if there’s any mismanage that is significant, we have every reason to be mad and give them some whacking. Why? Because most of us pay tax! Hahaha!!!

    Thank you for your visit and yourcompliment. Do have a nice weekend. 🙂

    1. Hi ODS,
      Thanks – I learnt quite a lot. Its gonna be a crackin weekend – North London derby.. (Hopefully it does not turn into another 4-4 draw! That’ll be too crazy!

      Up the Gunners!

      ODS: Thank you for your comments. And yes, it was cracking weekend indeed.. 3-0!!!

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