sorry bros, have to earn a living this morning. Need to work harder now to buy gas. Just filled up a honda city, a 1.3 c.c. car, and the amount is RM98 when the usual amount before the hike was about RM65. i don’t think many can cope. Will respond to you when i am free.

Ok, Godfather and Undergrad2, let me expand a bit what I was trying to say.

Government’s operating expenditure (OE) is going out of control. The danger with OE is it is very difficult to reduce once it is there. The salary and pension of government servants constitute one of the largest amounts. Then we have debt service charges (interest charges on loans taken earlier) and other expenses I mentioned earlier like subsidies, transfers and grants, supplies and services and one more item known as “lain-lain”. Adding all these up is about RM128 billion in 2007. All these numbers are available in the Treasury Economic Report 2007/08 available at the Treasury of Malaysia website. As I mentioned earlier, the direct subsidies, (i.e. subsidies paid of government’s consolidated fund) was about RM12 billion in 2007. This year it will be higher, as mentioned my Minister of Finance II. Be that as it may, the fiscal position of the government is not, to my mind, solely due to subsidies payment although the amount involved is getting larger. Going forward, the government must learn to be more prudent in managing its finance, in addition to just removing subsidies.

When undergrad2 mentioned about OE being 2% of national budget, I think he was referring to the OE component of development expenditure (DE). But here I am talking about “pure” OE (RM128 billion in 2007), i.e expenditure incurred when running the operations of the federal government. This expenditure excludes project and infrastructure development which are classified under development expenditure which in 2007 was only about 40 billion.

When undergrad2 mentioned about bloated civil service, my response was it is true. The tragedy of a bloated civil service goes beyond paying salary and pension. The damage as pointed out partly by Godfather is more than the salary and pension incurred. When a person is employed (when that person is not really needed, got it?), the liabilities is more than the salary. We have to provide him an office space, air cond, computer, telephone, stationeries, and “something” for him/her to justify his/her position. So layers and layers of red tapes and bureaucracies were created just to keep these people occupied (in economics we call this generating activities, not output). Most of these positions have no GDP creation or efficiency enhancement impact. In fact they are there to create “disservice” and caused more problems for our economy. Since we can’t sack civil servants, and also due to social and welfare reasons, it is better to pay them and ask them to stay at home. Trust me; our economy will perform better because by removing the “disservice”, we improve GDP creation capacity of the economy. I don’t recommend VSS because it can be easily abused. They will pay themselves off handsomely only to be re-employed again the moment we put our guard down. So continue to pay them salary but asking them to stay at home is the best. Indirectly we are also telling them they are parasites. Of course I don’t expect Bernadette to understand because his puny brain can’t take it.

With regard to fiscal deficit, (i.e. Revenue minus OE and minus DE), the federal government has incurred deficit consecutively over the last 10 years amounting to about 20 billion a year. So ten years is about 200 billion. The issue I want to raise is: the government should have been more prudent and frugal when the going was good and when our economy was not subjected to so much pressure as happening now. Someone wrote in this blog once about “ants and grasshoppers story” some time back. Yes our government is behaving like grasshoppers. They have no money sense, no saving culture, can’t anticipate and can’t handle issues that have more than three variables. They want joyride all the time thinking that government’s resources are unlimited. So you may ask, what is the rationale of removing fuel subsidies? Well, the reason is not because the government want to be more prudent with its finance now. The real reason is because the government want another source of fund to support their unquenchable big spending habit. In fact, if this habit is not changed, no amount of subsidies removal will solve our problem. I am thinking what is next. Do you?