Don't just spend, reallocate better
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Pre-Budget Interview with REFSA: Do not just spend, reallocate better

Budget 2012, announced on 7 Oct 2011, has received both bouquets and brick-bats for its goodies-galore bent.

Prime Minister Datuk Seri Najib’s “election budget” and its populist generosity on handouts, subsidies and civil servants’ pay  may appeal to those who directly benefit but is being chided by economists and analysts for presenting unsustainable solutions to the pressing reality in Malaysia – ballooning national debt and  the soaring cost of living.

Ironically, these issues were the sizzling subjects in BFM’s Breakfast Grille on the morning before the announcement of the Budget. REFSA executive director Teh Chi Chang took on the hot seat with ISIS’ CEO Dato Dr Mahani Zainal Abidin to highlight what Budget 2012 should address.

Interviewed by BFM host Noelle Lim, the conversation included subsidies to help needy rakyat face rising cost of living, the governments’ allocation of funds and the conflicts posed by the government’s substantial role in the economy.

Support, not Spoon-feed

Mahani emphasised that subsidies should be targeted to people who need it most, because such financial aid is difficult to withdraw once given.

Chi Chang suggested a holistic aid package, which includes direct cash payments, educational support and job training, so that the poor are not just receiving handouts, but are able to break out of their dependence on subsidies.

On the subject of empowering the underdogs, Chi Chang believed that instead of being obsessed with churning out graduates, funds could be pumped into a more inclusive system that allows the less academically-inclined a fair share in the economic pie. Vocational education and upskilling programmes opens job opportunities for those with only SPM- level education or its equivalent, who make up 70 percent of the local workforce.

Current global food shortage also drove Mahani to advocate subsidies for the agricultural industry, thus lessening the country’s dependence on food imports.

The Devil is in the Debt

With our national debt at a whopping 53 percent against the GDP (European Union considers 60 percent the debt ceiling), Noelle Lim probed if our government can afford to keep spending without raising taxes.

Chi Chang and Mahani both agreed that it is possible for taxes not to be raised. Mahani opined that our debt level is still manageable, and effective allocation of our country’s profit from last year would be the answer.

Chi Chang did not share her optimism, pointing out that 53 percent of debt is not far away from 60 percent. He explained that the national debt would be manageable if Malaysia’s economy is resilient against the global economic turmoil and is able to pay off the debt with returns from development. But with our government still having to help the people struggle against inflation, the prospect of escaping from the growing debt in the near future seems bleak.

GLCs: Too Close for Comfort?

People don’t realise how involved the government is in the economy, said Chi Chang, citing Khazanah National Berhad’s findings that the significant presence of government-linked companies (GLC) is crowding out opportunities for private businesses in the market.

Chi Chang also cautioned that with GLCs being the major players in mature industry like education and healthcare, conflict of interest is bound to arise. For example, while the government is expected to improve public healthcare and education services, they also hold major stakes through GLCs in private schools and hospitals. The thriving of one would undoubtedly lead to the suffering of the other.

Mahani, however, rebutted by saying that public and private healthcare are catering to two different market segments. The ones who can afford private services should be given the option to do so, without crowding out the public service.

Chi Chang and Mahani also debated on the effects of GLCs buying out private companies.

For the complete insights and arguments on these issues, dig into the succulent BFM Breakfast Grille interview below, or click here for the podcast.

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