Tuesday, October 19, 2010

Budget 2011, Will Crony Capitalism Be Alive And Kicking ?

Hantu Laut

While I yearn for a better Malaysia where the gap between the rich and poor would narrow down to a civilised level I just could not comprehend the logic of a 100-storey tower that could help us jump start an economic miracle to becoming a high income nation.

We need to grow an average 8-10 percent annually for the next 10 years to ever come near that dream.

Can we?

Which economic formula is the Prime Minister using? Adam Smith's "invisible hand", John Keynes principal of government intervention or Milton Friedman's free market economy and government non-intervention,, or all pleated into one.

All three are acceptable economic principles that have been used over the century in varying degree.

However, the global financial crisis in 2007 has brought the resurgence of Keynesian economics.

Though, government intervention advocated mostly legislative in nature, fiscal and monetary measures are needed to mitigate adverse effect of economic recessions.In severe cases where the private sector had become incapacitated such scenario occasioned the use of government funds to save the economy.The Western economies are still reeling from the effect of the private sector's bad financial governance.

The 2007 global financial crisis that led the US and other Western economies to bail out failed financial institutions by taking up equity and management of these companies was one such occasion.It helped to decelerate economic meltdown and brought speedy recovery to the economy.

The building of mega structures for prestige rather than economic considerations will not excite the economy as much as if the money is spent on increasing industrial outputs.

Putrajaya is the ultimate white elephant and we don't need anymore of such monument to strain our financial resources.Too often, we have mega-failure projects like the PKFZ and Bakun Dam which punch big holes in government finances and disgrace to the nation.

Ours is a nation that survived on our trading capabilities and have to reckon with countries like Thailand,Vietnam,Indonesia and big player China in the world markets.These are sectors that needed to be boosted. China would eventually become a big economic threat to smaller nations in this region.

Letting the private sector to take the lead is well and good as long as the government stop crony capitalism which has been the practice all these times.It leads to inefficiency and cost ineffectiveness to the system.

Letting those who knows the business best do the job is the only way to bring competitiveness to the industry.In the past almost all government projects,special licences,approved permits had to go through UMNO linked middlemen who sat on their arses and do only Ali Baba business to collect huge windfall from the project.

The government should wake up to reality and be bold enough to correct mistakes of the past.

Malaysia has probably one of the worse practices of trade monopoly in a free market economy. These are given to either GLCs or cronies.The breaking up of these monopolies should be given priority to liberalise the market so prices can find its own level.

Bigger chunk of our annual budget goes to recurring expenditure, literally, to take care of the grossly over-staffed and inefficient civil service.We have over 1 million civil servants to take care of 26 million Malaysians while the UK had only around 500,000 against a population of 61 million.

It's a reflection of bad policy of the government of creating jobs just to give employment to the majority bumiputras. When the oil wells run dry this country will be bankrupted by none other than the civil service.It's about time the government starts trimming the civil service down to less shameful level.

In Budget 2011, Sabah and Sarawak would probably be the biggest losers getting only a meagre RM10 billion in projects or just 8 percent of total value of projects mentioned in the budget.Despite Sabah and Sarawak contributions to the total government revenue the two states stayed neglected and may lose its premium as fixed deposit states.

Why is it that most development should be in Kuala Lumpur, which is already a burgeoning city with highly developed infrastructures and a dysfunctional traffic system that clog the city roads and streets despite billion of ringgits spent? More mega buildings and construction of the mass transit would be a major nightmare for the city dwellers.

More money should be channelled to Sabah and Sarawak for infrastructure development.The two states with land masses over three times more than that of Peninsula Malaysia still remained backward because of neglect and inequitable distribution of development expenditure.

Obviously, the government is only interested in monumental and cosmetic economic reforms which is not going to help up the value chain and make Malaysia high income nation in the near future.

I don't see it as an exciting budget but more likely acts in furtherance of existing crony capitalism.

Najib needs to do more.He took over a weak administration and party members who are used to the spoils system.


SM said...

Bro HL,

Spot on! And to answer your question....YES!

The PM is using Mahatir-Economics bah! Throw in a few Mega Projects (& obviously the cronies get the Contracts) & all's well! I hear Mahatir has alreday "approved" the 2011 Budget (does that tell you anything?).

Sabah & Sarawak being the "fixed deposits" of BN should have got more. I'm really surprised they did not get much. I guess the Federal Govt still thinks they can throw some Peanuts to East Msia & all will be ok. Well, maybe it's time the East Msians show that they are not monkeys & reject the Peanuts being thrown to them?

What KL needs is a good transport system. Other than that KL is fine. It has enough Mage Projects to keep it growing steadly. Why does it need another tall tower? Geeeeze!

Next, discounts on hand-bags & cosmetics?! Or maybe I read the report wrongly? Give us doscounts on Rice & Petrol...sure...but cosmetics? Who's Economics is this? I won't say her name here as I may get in trouble!

Kenn said...

One opined as follows:-

"What ever this thing is, it is not economic model perse. Just a bunch of projects being put together"

Read more at Punahsihat Dok Tingkat Mana Pula?

Kenn said...

The government should wake up to reality and be bold enough to correct mistakes of the past.

Talking about the tower, and being closer to the rakyat, here is one - MENARA BABIL