A budget in search of a vision

2019-10-14

Budgets are not just about allocating scarce resources but about achieving a national vision. It was hard to figure out what vision animated the recently announced 2020 budget by the Pakatan Harapan (PH) government which came to power on the promise of transformation and reform.

When PH took office there was much talk, for example, about the need to rein in out-of-control government departments like Jakim which had been accused of promoting extremist policies. Prime Minister Dr Mahathir Mohamad, for one, complained while in opposition that Jakim wanted “to compel everyone to follow its version of Islam.” And he was not alone; the Sultan of Johor found some of Jakim’s activities troubling while others argued that even its constitutionality was suspect.

On taking office last year, Mahathir promised that he would set up a committee to evaluate Jakim and recommend reforms. Of course, it was all just talk. And now we find the government increasing Jakim’s budget to a staggering RM1.3 billion. It was a little more than RM810 million when PH came to power. No doubt, it will be put to good use to “Islamise everything,” as Mahathir once groused.

The same can be said of the education ministry which this year received the largest allocation amounting to some RM64.1 billion. We all know our education system is in a mess and in need of urgent reform. After more than a year in office, our education minister still doesn’t have a clue about what needs to be done. Pouring yet more money into a failed education system and somehow expecting better results is, of course, the very definition of insanity, to borrow a well-worn phrase.

The decision to acquire four highways in the Klang valley via government-guaranteed borrowing is also puzzling. If news reports are correct, the government might be paying higher than market value for highways which will, in any case, revert to the government in less than ten years’ time when the concession period ends.

At the same time, reports indicate that the government is mulling a plan to sell Khazanah-owned PLUS (the largest toll expressway operator in the country) at a significant discount despite the misgivings of senior officials.

It’s hard to make sense of what is going on; is the government’s strategy to acquire highway concessions or dispose of them? Are we going to see absolute transparency or a return to the kind of crony deals that were reminiscent of Umno-BN days? The finance minister certainly has a lot of explaining to do.

Budget provisions relating to the housing sector were just as puzzling. In order to help developers get rid of a massive RM8.3 billion inventory of unsold high-end condominiums, the government lowered the threshold for foreign ownership from RM1 million to RM600,000.

We all know that developers generally eschew building affordable homes in favour of high-end condos because the return on investments is higher in that segment of the market. Yet when they cannot sell their inventory, they come crying to the government for help. Of course, they are a powerful lobby group with great political connections, so the government must immediately respond with all sorts of programmes to help them.

The government has also rolled out a programme to exempt buyers from stamp duty if developers offer a 10% discount. In the first place, a 10% discount is no skin off their backs since housing prices are overinflated anyway.

And, as Chang Kim Loong, the secretary-general of the National House Buyers Association asked, “Why should the rest of the country subsidise these developers? They made a bad business decision and the rest of us have to subside their loss. It’s elementary economics that when a product can’t sell, you sell it cheaper in a soft market.”

Lowering the threshold for foreign ownership will only encourage developers to keep building more high-end units. Now even the Penang state government wants to reclaim more land to build more high-end condos which will ultimately end up in the hands of foreign buyers. So, too, will the now revived Bandar Malaysia project.

Foreigners, of course, won’t buy property unless they can be assured of getting some form of permanent residence. The end result will be more and more foreign enclaves in the best parts of our cities while Malaysians get pushed further and further out to live in smaller and smaller condos for which they will have to pay higher and higher prices.

When he was in opposition, Mahathir also made a lot of noise about how PRC nationals were buying up property in Malaysia, especially in Forest City, and blasted developers for prioritising the needs of foreigners above that of Malaysians. Now, a member of his cabinet is thinking about going to China and Hong Kong to persuade more PRC nationals to buy property here.

When Najib Razak’ administration did it, it was all wrong, a sell-out to China, but when the current government does it, we are supposed to accept that it is in the national interest. How not to get cynical?

The same muddled mindset was also at work on the issue of foreign labour. Employers and others have long used an array of fake arguments – including low productivity and the apparent reluctance of Malaysians to work in certain sectors – to deliberately keep wages low. Even the budget announcement raising the minimum monthly wage by a measly RM100 ringgit (from RM1100 to RM1200) was not well received by the Malaysian Employers Federation.

Employers, of course, can get away with this exploitative and unjust wage regime simply because the government continually gives in to their demands to import ever-increasing levels of cheap foreign labour.

Instead of forcing employers to reduce their dependence on cheap foreign labour – by imposing higher penalties for employing foreign workers, for example – the government is now trying to bribe them using taxpayers’ money. Malaysians who replace foreign workers will get a monthly wage incentive of RM350/RM500 for two years depending on the sector, while employers will get a monthly incentive of RM250 a month throughout the same period. But who wants to employ Malaysians when they can get cheap foreign labour to abuse and dispose of at will?

At this rate, more and more Malaysian workers will go abroad, illegally if necessary, to Japan, Singapore or Australia to earn a more decent wage. What’s the point of attracting more foreign investments and promoting industrialisation if it only benefits millions of foreign workers and traps Malaysians in dead-end low paying jobs?

The final word, of course, goes to finance minister Lim Guan Eng. In a fit of modesty, he reportedly called his own budget “extraordinary.” How extraordinary!

 

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