DAP election strategist Ong Kian Ming said there are “major gaps” in the book “Economic Reform in Malaysia: The Contribution of Najibnomics” by Bruce Gale, an independent analyst who writes for Singapore’s The Straits Times.
“The problem with this traditional argument in support of such ‘austerity’ policies is that firstly, they don’t examine the damage done to individuals and families, especially those with lower incomes, and secondly, they don’t analyse the devil in the details,” the Serdang MP said.
Gale had in his book defined Najibnomics as “the practice of increasing the resilience of an economy by pressing ahead with macroeconomic and administrative reforms regardless of their short-term political cost”.
Gale also defended Najib against critics who slammed his abolition of subsidies and implementation of the goods and services tax (GST), saying his macroeconomic policies had been “broadly appropriate”.
“Failure to remove them would have meant little money left for health and education as well as the infrastructure necessary to ensure future economic growth,” Gale reportedly said, adding that government subsidies were already unsustainable by the time Najib became prime minister in 2009.
Gale said the GST was necessary to force the middle class to share the tax burden.
“Tax avoidance in Malaysia is a serious problem. Only one in 10 people actually pays income tax.
“This is significantly lower than in many other middle-income countries, and far lower than in the high-income economies Malaysia says it wants to emulate,” Gale said.
Ong said the withdrawal of subsidies were supposed to be coupled with some mitigation measures but this had not taken place.
“Gale focused on the withdrawal of subsidies for three items, that is sugar, petroleum and the electricity tariff.
“He ignored the impact of the withdrawal of subsidies on other necessities such as flour and cooking oil as well as toll prices, just to name a few. And he failed to discuss the ‘mitigation’ measures that were supposed to cushion the blow of taking away these subsidies.”
According to Ong, back in 2010, the minister in charge of Putrajaya’s Performance Management & Delivery Unit, Idris Jala, said the subsidies would be cushioned by targeted “mitigation” measures.
“For example, in place of the petrol subsidy, each person with a motorcycle that is less than 250CC would receive an annual subsidy of RM54 while each person with a small car (less than 1,00 CC) would receive an annual subsidy of RM126.
“To cushion the impact of the increase in toll prices, Idris promised a 20% rebate for heavy toll road users.
“To cushion the impact of the price rise in sugar, flour and cooking oil, poor families would receive a cash rebate of RM20 in the first year and an unspecified discount through the MyKasih card in the 2nd year.
“These mitigation measures disappeared in 2011, or were never implemented, leaving consumers, especially the more vulnerable groups, financially worse off,” Ong said.
He said in contrast, hospital charges and university school fees were raised as part of the subsidy “rationalisation” plan.
Contingent liabilities
On another note, Ong highlighted how Gale fails to mention the rise in off-budget spending as well as the increase in contingent liabilities under the Najib administration.
“Contingent liabilities or debt by government-owned and government-controlled entities which are fully guaranteed by the federal government increased from RM96.9 billion in 2010 to RM187 billion in 2016, an increase of RM90.1 billion or 93%.
“In comparison, the total budget expenditure increased by only 31.5% during the same time period, from RM203 billion in 2010 to RM267 billion in 2016, representing an increase of RM64 billion.”
Ong explained that the big ticket contingent liabilities – expenditure for the LRT extension and the upcoming LRT Line 3, the MRT Line 1, Line 2 and possibly Line 3, the East Coast Rail Link (ECRL) and the Kuala Lumpur-Singapore High-Speed Rail (HSR) – may have to be eventually financed directly by the federal government.
Budget allocation to PM’s department
Ong also questioned Gale’s ignoring of the rapid rise in the budget allocation to the Prime Minister’s office.
“Gale totally ignored the fact that the allocation to the Prime Minister’s Department grew significantly under Najib’s watch.
“The total budget allocation (operating and development expenditure) allocated to the Prime Minister’s Department grew from RM12.2 billion in 2010 to RM20.3 billion in 2016, an increase of 66.5%.
“The overall budget only increased by 31.5%. In other words, the allocation to the Prime Minister’s department grew more than twice as fast as the total budget expenditure,” Ong said, adding there was no excuse for the omission as opposition politicians have highlighted this expenditure year after year.