(Updated)

1. Ballooning budget deficit – Parliament has been presented with two sets of supplementary estimates, the second supplementary estimates for 2009 totalling RM11.36 billion (i.e. RM8.98 billion for Operating and RM2.39 billion for Development), after the earlier first RM10 billion supplementary estimates and the first supplementary estimates for 2010 totalling RM12 billion for both operating and development.

We are debating the second supplementary estimates for 2009 Budget which will be followed by the debate on the first supplementary estimates fo 2010 Budget.

These two sets of supplementary estimates before the current meeting of Parliament are most surprising, as the country was told by the Prime Minister cum Finance Minister Datuk Seri Najib Razak when presenting the 2010 budget on 23rd October 2009 that the fiscal budget of the Federal Government had reached a peak at 7.4% of GDP in 2009, and that the fiscal budget is expected to decline to 5.6% of GDP in 2010.

With these two sets of supplementary estimates, Malaysia’s budgeting has again gone awry with the budget deficit in 2009 shooting to as high as 7.9 per cent of GDP in 2009 and over 7% in 2010.

A full explanation for this fiscal indiscipline and even irresponsibility should be given, as this is proof of imprudent control of public expenditure amidst inefficient utilization of the nation’s financial resources.

For instance, RM32 million is allocated in the 2009 Development Supplementary Estimates for the purchases of aircrafts for the police, which apart from allowing the Inspector-General of Police and top police officers to work in style makes no contribution whatsoever in the campaign to fight crime to make the country safe to work and play by Malaysians, tourist and investors.

The RM34 million would be better spent in purchasing say some 68,000 bicycles or 6,800 Honda cubs for all the police stations in the country to increase police visibility with frequent police beats, which is the best and most effective way to combat combat crime to keep the people in the streets, public places and private homes free from crime and the fear of crime!

2. The greatest tragedy of the country’s development history is the marginalization of rural and urban groups denied equal treatment as full-fledged Malaysian citizens – not only in Sabah and Sarawak but also in Peninsular Malaysia. One such group are the people in Pekan Kaki Bukit and Pekan Sayor Kaki Bukit which I visited over the weekend, to hear their tale of marginalization where the close to 1,000 people in the two areas have been living in their homes, some for three and even four generations for some 70 – 80 years without land titles. The the MP for Padang Besar, Datuk Seri Azmi Khalid is the Chairman of the Public Accounts Committee and former Minister is four-term MP for the area since 1995. How could he allow such gross injustice totally against the spirit of 1Malaysia to continue unchecked for the 15 years he was the MP for the area?

3. Now we are told that all this will be addressed in the New Economic Model unveiled by the Prime Minister on 30th March to enable Malaysia to escape the middle-income trap for the past decade and transform Malaysia into a high-income advanced nation with inclusiveness and sustainability.

When Datuk Seri Najib Razak became Prime Minister last April, he announced that the government would introduce a new economic model for the country to ensure that Malaysia makes a quantum leap to escape the middle-income trap to become a high-income country through greater emphasis on innovation, creativity and competitiveness.

In May last year, the Second Finance Minister, Datuk Seri Ahmad Husni Hanadzlah said the new economic model would be announced in the second half of the year.

Time is clearly of the critical essence to launch a new economic model as Husni subsequently admitted in a very frank speech in December that the country had lost a decade in economic stagnation.

In actual fact, the World Bank had recommended that Malaysia adopt a new economic model three years ago, stressing that industrial countries are already aiming for economic model 3.0, and with competition at economic model 1.0 intensifying, striving to achieve economic model 2.0 is not an option for Malaysia but a necessity.

The government has to explain why the World Bank’s advice that Malaysia migrate to a new economic model 2.0 was ignored for three years, losing more precious time for Malaysia to catch up in the international competitiveness race when the country had become a straggler as compared to other countries.

But there is more flip-flops and procrastination. The New Economic Model was not fully released on March 30, only Part I with Part 2 promised when the Tenth Malaysia Plan is presented in Parliament and launched in June this year.

Najib has described his 1Malaysia concept has the roof of the Malaysia he is building, the Government Transformation Programme and the NEM as the two pillars, while the Tenth Malaysia Plan the floor, the basis where all Malaysians will move forward.

But there has been further delays and procrastination as the short-lived promise of the publication of Part II of the NEM has now been further deferred from June to the quarter of the year, according to the National Economic Advisory Council Chairman Tan Sri Amirsham A. Aziz.

So when Parliament meets in June to approve the Tenth Malaysia Plan, the floor of the 1Malaysia house will not be ready – which undoubtedly is going to create problems apart from the extraordinary construction method Najib has adopted like building castles in the air – the roof first, then the pillars and without the floor!

Actually there is nothing much new in the NEM which is 10 years too late. This is because many of the things proposed in the NEM had actually been proposed at various times in the past decade.

Former Prime Minister, Datuk Seri Abdullah Ahmad Badawi, for instance, in his speech to the Harvard Club in May 2005 said that Malaysia must rid of three addictions if it is to be a developed nation, namely cheap foreign labour, subsidies and rent-seeking.

But nothing has been done to resolve these “addictions” apart from making diagnosis of the ills of the Malaysian economy. In fact, we have many rent-seekers among Barisan Nasional MPs in this House!

In 2002, when launching the Knowledge-Based Economy Master plan also described as Strategic Initiative One of the 21st Century, the then Prime Minister, Datuk Seri Dr. Mahathir wrote in the foreword:

“Recognising the critical need for knowledge as input, Malaysia has embarked on the transformation from an input-driven growth strategy that had served her well in the past to one that is increasingly driven by knowledge in order to achieve sustainable high growth and development, The intention to migrate from a production based economy to a knowledge-based economy and the development of a Master Plan to chart the strategic direction towards the knowledge-based economy were first announced in Budget 2000. Prior to this, the Government has, however, adopted several initiatives aimed at developing Malaysia into a knowledge-based economy. Of significance was the establishment of the Multimedia Super Corridor (MSC) in 1996, providing world-class facilities to foster the development of high technology and innovations for both domestic and foreign companies and the implementation of several flagship applications, including the multi-purpose card, smart schools, telehealth, E-government and technopreneur development as well as the provision of tax incentives to promote an information technology-savvy society.

“The Knowledge-based Economy Master Plan marks yet another key initiative of the Government to further accelerate the development of the nation into a knowledge-based economy as well as in achieving the objectives of Vision 2020. The Master Plan provides a strategic framework outlining the changes to the fundamentals of the economy. It articulates a vision and mission besides prescribing seven critical areas with a total of 136 recommendations that need to be addressed in moving forward to the knowledge-based economy. It is noted that several recommendations of the Master Plan have already and continue to be addressed and implemented by the Government.”

Let us look at some of the 136 recommendations in seven critical areas made by the Knowledge-based Economy Master Plan to move Malaysia forward to an knowledged-based economy before 2010, viz:

• Put in place, by 2005, the e-education enabling environment for the entire education system;

• Prepare by 2002, all universities for professional assessment and rating;

• Step up measures to recruit those with Ph.D. qualifications into universities and set a target that by 2010 all academicians in all public universities will have a Ph.D qualification.

• Develop Malaysia as a centre of excellence in education and training.

• Grant automatic work permits and right of abode to top-level foreign talents.

• Grant right of abode to Asian/world class talents in all creative fields.

• Develop management of human resources based on competency.

• Attract some of the best brains into the public sector.

• Improve English language capabilities.

• Enhance access: Wire and electrify every nook and corner of Malaysia.

• Enhance access: Provide PC and Internet access to all schools.

The Knowledge-Based Economy Master Plan a decade ago was a total failure and that is why the NEM today has to recycle many of the proposals made then.

In the past decade, with many reports and plans, Malaysia is not short of analysis and solutions to the ills of the Malaysian economy, but what is lacking is the political will to walk the talk and to implement them.

As a result, Malaysia is faced with a full-blown national-building and economic crisis after a lost decade of economic stagnation.

How serious is this crisis. Lets us refer to the New Economic Model (Ch. 2, p. 41) for a description of this Malaysian crisis:

1. Economic stagnation – “What little life remains in Malaysia investment (since 1997) has come from state direction rather than private strength; in the decade after 1997, private investment as a fraction of GDP declined to less than one third of its pre-1997 peak.

2. Structural weaknesses in Malaysia’s path of economic development – depleting resources; difficulty in doing businesses; sluggish bureaucracy no longer fit for purpose in a fast-moving world;

3. A disastrous exodus of human capital has flowed from the perception that in Malaysia’s labour markets, rewards have historically not been commensurate with skills, achievements and merits. Perhaps half a million talented Malaysians now live and work outside the country – 50% of them educated up to tertiary level, all embodying valuable skills no longer available to contribute to economic development in the country. Since 2000, the number of expatriates working in Malaysia has declined 9% a year.

4. Malaysia has reached a defining moment in its development path. It risks beings left behind or worse still, suffering a reversal in living standards unless it implements far-reaching and comprehensive reforms. Economic policies to date are no longer keeping Malaysia competitive enough, regionally and globally, to generate sufficient growth.

The NEAC ended Chapter 2 will the warning “We must act now before our position deteriorates any further” and devotes the final chapter, Ch. 7 on “The time for change is now – Malaysia deserves no less”.

But there is a total absence of urgency on the government’s part, which explains why the NEM report is not even presented in the House (we have only the Executive Summary) when there should be a full-debate,

This represent one of the three factors which NEAC has warned could cause the failure of NEM.

To quote the NEM (p. 110):

“Three factors may explain such failures. The first is insufficient buy-in by stakeholders affected by the required reform measures because they were not engaged at the policy formation stage.”

When there is no effort to “buy-in” the support of Parliament, by tabling the NEM and having a special debate on it, how could anyone expect that NEM would get larger national or civil society support.

(to be contd)

[Speech (Part 1) by DAP Parliamentary Leader and MP for Ipoh Timor Lim Kit Siang on the 2009 Supplementary Estimates in Dewan Rakyat on Tuesday April 6, 2010]