The Budget presented by the Prime Minister was a eulogy for the death of the New Economic Model. It provides a clear confirmation that this Government is incapable of living up to the rhetoric of reform that it had vigorously promoted over the past year.

The slogans and feel good speeches crafted by highly paid spin doctors have not been translated into clear action programs. The divided and weak BN Government remains mired and has now demonstrated its inability to deliver upon its promises of change.

The Budget marks the return to failed economic policies of the past. The Mahathir Economic Model built around mega projects, crony capitalists as key players, bailouts and handouts is once again alive and returns to haunt the nation.

The Budget yet again demonstrates that this administration is incorrigibly incapable of drawing lessons from the past and persists with policies that have entrapped Malaysia in the middle income trap.

The Budget for 2011 has all of the attributes of a blunt tool for distributing public funds to UMNOputras, BN cronies, and vested groups that constitute the vote bank of the Barisan.

The distribution of public resources is to be achieved by way of granting mega projects to UMNOputras and cronies, new and additional perks to the 1.2 million public servants and party hacks that feed at the public trough.

The timing is indeed not a coincidence as it is ahead of the impending General Election. In brief, the Budget is more than just a throwback to the discredited Mahathir era of mega projects, bailouts, piratization of public assets and rampant corruption.

The Budget will not only return the nation to that tragic era of bad governance but put it on a path to economic disaster in the medium term.

Underlying Budget Strategy

The Budget provides in rather stark terms confirmation of the fact that the Prime Minister is indeed consistent.

After having used the technique of dishing out grants and “projects” in recent by-elections in a desperate attempt to win, he is now resorting to the use of the same methods to win the GE 13.

The only difference is that what was practiced at a “retail” level is now being translated into a “wholesale” activity to blatantly buy the next election.

The announcement of multiple mega projects with little economic rationale, and the handing out of perks to particular constituencies and interest groups is nothing but a magnified and enlarged game plan to win the next election at all costs. Party interest is placed ahead of the national interest.

The Prime Minister stated in his speech that the “era of Government knows best is over” and referred to the so-called consultations in the formulation of the Budget. These consultations were nothing but process-driven and largely concentrated on the identification and confirmation of projects of benefit to UMNOputras and BN cronies.

No consultations were held with the State Governments. Neither the BN nor the Pakatan state governments were engaged in a dialogue, giving a lie to the statement that the Federal Government no longer takes the position that it knows best.

The much promoted NEAC analysis and recommended policy reforms under the rubric of the New Economic Model have been totally ignored in the formulation of the budget for 2011. Indeed, the only reference to the NEM is in this preamble to the speech.

The Budget presented on Oct 15th is singularly silent on the issue of key reforms needed to restore competitiveness, provide the basis for the private sector to assume the lead role in spearheading economic growth and transformation, and place Malaysia on a path that would permit it to escape the middle income trap by the end of the next decade.

Next : Part 2 – Recent Economic Performance & Prospects