We have one of the highest wastage of public funds through corruptions and incompetence.It wouldn't be an over-statement to say that at least 30% of taxpayers money are lost to these two evils in government.
We are also blessed by exploitable natural resources that gave us a sound economy that allow us to survive the pilferage,incompetency and inefficiency in the system.The biggest source of government funding comes from taxes and oil revenue.With falling global price of crude oil a big chunk of this revenue would be wiped out requiring the government to look for alternative source of financing for its budget.
If the world markets for crude oil and palm oil do not improve in the near future and with the decline in exports of manufactured goods the government would have a serious budget deficit.The liquidity problem is much more serious than those in government have anticipated.A near negative growth in the following year is not a far-fetched scenario.
China, now the second largest economy after the US, which have had double-digit growth the past few years will face a downturn in its economy soon.With two of the world largest economy slowing down there would be huge decline in demand of commodities including demand for crude oil.How long the recession would last is difficult to guess.Bail-outs in the US have not picked up momentum or showed any improvement to the economy.
Finance Minister and Prime Minister in waiting Najib Tun Razak would have to crack his head to find a solution to the problem.
A recent proposal to sell government assets to raise funds sounds impractical and would be easier said than done.Unless the government is prepared to sell these assets at very low prices there would be few takers.Those with money to buy would look for real bargain.Chances are it would go to cronies even at more depressed price.It would lose future income if income-generating assets are sold.Only loss-making corporations and non-income generating assets should be considered for sale.
Selling government controlled blue chips would be killing the goose that lay the golden eggs.The PM and Finance Minister should not agree to the sales of any of these golden assets in a depressed market.
Worst case scenario, the government may have to trim its development expenditure to reduce the budget deficit.
In October I predicted that the price of crude would fall to around US$50 per barrel before the end of the year in my post "Where Crude Oil Heading For" .The price had tumbled to US$55 in spite of OPEC cut in productions.This means that demand had gone down faster and bigger in volume than OPEC cut in production.
Prolonged period of depressed crude market would spell trouble for Petronas and the Malaysian government spending.
On a lighter note, I find Malaysian generally more interested in politics than the state of the economy.
The good news is prices of consumer goods would go down as well and consumers should be smart to avoid those businesses that are profiteering by not adjusting prices.