Malaysia Chronicle
As expected, Prime Minister Najib Razak unveiled a Budget 2012 stashed with cash goodies aimed to lure voters back to the BN fold, but it was immediately shot down not just by opposition but also by financial experts who gawked at his overly rosy economic projections.
In Budget 2012, Najib forecast GDP growth of 5 to 6% while the deficit was to drop to 4.7% from a projected 5.4% in 2011.
"That's a pretty bullish outlook relative to the street and relative to ourselves as well. We're looking at 4 per cent this year and 4.2 per cent next year. Second-half growth has to turn up to 5.5 per cent to average even 5 per cent. So that looks a bit optimistic from my view," Hak Bin Chua from Merrill Lynch Bank of America told Reuters.
Faking it with overblown growth projections, no details on where money to come from
But Najib, who is also Finance minister, may have no choice. If he did not ‘fake’ his projections, there may not be enough to finance the plans he unveiled.
“Perhaps the most worrying is that Malaysians are like the proverbial frog in the hot soup, where the frog does not realise the soup is slowly but surely reaching the boiling point,” Tony Pua, the DAP MP for Petaling Jaya Utara, said in an immediate reaction.
“We may not yet be facing the crisis of Greek proportions, but Budget 2012 is doing very little to avert such eventuality, leaving the Malaysian economy nakedly exposed to the inevitability.”
Buttering up Felda settlers and the civil service
On Friday, the scandal-tained 58-year-old Najib presented a RM232 billion budget, with RM181.6bil for management and RM51.2bil for development. He also announced the much-anticipated listing of Felda Global Ventures, promising a ‘windfall’ for all settlers – who now number some 2 million in total, including their children and grandchildren. Obviously, the Felda folk will form a crucial and core voting bloc for his Umno party.
There were no individual or corporate tax cuts as speculated, despite plans to launch an unpopular and hefty Goods and Services Tax or GST after the 13th General Election.
Najib also increased employers' contribution for the Employees Provident Fund from 12% to 13% for those earning RM5,000 and below.This obviously is good for the employee but puts more money into the EPF, which has come under fire for questionable loans to government-linked firms and agencies, such as the recent and unannounced RM6billion loan to Felda.
He also announced an additional half-month salary bonus, with a minimum of RM500 for government pensioners, to be paid together with the December 2011 salary. So, for the whole of 2011, including previously declared bonuses, a total RM1,000 minimum has been announced for civil servants and government pensioners. This will benefit some 1.3 million civil servants, 618,000 pensioners and will cost the government RM4 billion.
"Najib has promised everything on earth but he doesn't talk about increasing revenues or transparency. It is unrealistic. It is clearly an election ploy. In the last 10 years, growth, deficit and foreign investment figures have always been proven to be wrong," Opposition Leader Anwar Ibrahim said in an immediate response to reporters.
Wooing back lower income group hit by subsidy cuts
For the lower-income groups, who have been upset at his slashing of subsidies for consumer essentials including petrol, cooking gas and sugar, rather than touch the RM19 billion gas subsidies given to crony-Independent Power Producers, Najib unabashedly courted them fistfuls of cash.
He announced a one-off RM500 cash assistance for households earning 3,000 per month and below, which will set the government back RM1.8 billion to benefit 3.4 milliion households, a one-off RM100 schooling assistance for primary and secondary school students from age 6 to 16, up to Form 5, which will cost taxpayers RM530 million, and a one-off RM200 book vouchers for students of private and public tertiary institution for Form 6 students, costing RM260 million.
EPF would also be allowed to ring fence RM1,300 from Account 2 of contributors for the purpose of pilgrimage to Mecca. The money will stay with the contributors, while they register for the Haj, which can a very long waiting list.
“It is very simple to tell whether or not it is an election ploy – just look at the number of one-off cash assistance. Najib is looking to buy GE-13 but my feeling is Malaysians are smarter. They should take the money, which actually comes from the tax that they or their parents pay, and then make sure the BN is booted out once and for all before they bankrupt Malaysia,” PKR vice president Tian Chua told Malaysia Chronicle.
Main projects in 2012
Total revenue for 2012 was forecast to increase 1.9% to RM186.9bil and the deficit to decrease to 4.7% of GDP from 5.4% in 2011. Najib also set aside RM29.8bil for investment in infrastructure, industrial and rural development and RM13.6bil for the social sector, including education and training, welfare, housing and community development.
The PM, who had to put on hold his New Economic Model after heated protest from hardliners in his Umno party, also announced plans to “focus on accelerating investment and further liberalise 17 services sub-sectors, in places enabling 100% foreign equity.” However, given that he did not immediately detail the sectors, these are expected to be non-critical and little-demanded sectors.
Among main projects to be implemented in 2012 are the East Coast from Jabor to Terengganu and road upgrades from Kota Marudu to Ranau. RM18bil of the RM20bil PPP Facilitation Fund will be used for high impact projects, with RM2 billion for bumiputera entrepreneurs. The government will also allocate RM978mil to accelerate the development in five regional corridors namely, Coastal Highway JB-Nusa Jaya,Taiping Heritage tourism project, Besut agropolitan project, Lahad Datu palm oil cluster project and water supply in Samalaju.
The Treasury Management Centre will be established and offer incentives to develop M’sia as a competitive financial centre. The Kuala Lumpur International Financial District will also kick off, with incentives including income tax exemptions for firms.
Property tax up, school fees abiolished
Real property gains tax was also raised from 5% to 10% if sold within 2 years; if sold between 2-5 years, it would stay at 5%; if sold after 5 years, it would be zero. RPGT was set at a 5% flat rate for properties disposed of within five years of purchase since April 1, 2007.
All primary and secondary school fees were to be abolished beginning with 2012 school term. This will cost the government RM150 million. Education would be allocated RM50.2 billion, of which RM1.9 billion for all schools, including mission and vernacular schools, RM1 billion for upgrade of schools premises (RM500 million for SRK, RM100 million for SRJK (Chinese), RM100 mil SRJK (Tamil), RM10 million for mission schools, RM100 million for Sekolah Agama Bantuan, RM100 million to MRSM – Mara secondary schools).
For the rural sector, Felda again walked away with the biggest goodies. Najib promised a RM400 million upgrade of water supply system in Pahang, Kedah, Kelantan and Terengganu.
He also set aside RM150 million for rural public transportation via SME bank for bus companies in low interest loans of 4% interest, and RM90 million for the Orang Asli for basic needs, including treated water and income generation, RM20 million for the community affected by Cameron Highlands landslide.
The civil service were not left out, with teachers receining the lion’s share. Teachers will now get ‘time-based pay rise schemes’, so teachers can go up the ladder faster. Effectively, it was an annual pay rise from RM80 to RM320 according to grade, or up 7-13%.
Senior citizens won’t have to pay outpatient fees at all government hospitals and clinics. 50% discount on LRT and monorail.
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