4 Policy Highlights

4.1 Spending RM220 billion more effectively, while reducing the deficit

The global uncertainties and prospect of lack-lustre private demand would ordinarily call for pump-priming and stimulus measures by the government.

However, Malaysia’s finances, after 13 consecutive years of budget deficits by the Barisan Nasional government, no longer permits massive stimulus packages. On the contrary, the recent experiences of crises in countries with massive deficits eg the United States, United Kingdom and Greece, calls greater attention to reducing budget deficits.

Against this backdrop, Pakatan Rakyat will strive to maintain the total level of federal government spending at RM220 billion¹⁰ in 2012. Pakatan Rakyat practices of competency, accountability and transparency will result in:
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3 Malaysia Today

Malaysia, too, has less fiscal options than before in weathering the impending turbulence:

• In 2007, before the 2008/09 crisis, our federal budget deficit was RM21 billion and total federal debt was RM267 billion, equivalent to 42% of GDP;

• For 2011, our federal budget deficit is expected to hit RM45 billion and total federal debt was already RM437 billion as at the end of June, equivalent to about 53% of GDP⁸;

• Indeed, ratings agency Fitch downgraded our long term RM sovereign debt rating to A from A+ in Feb 2009. Malaysiahas not been able to secure a return to A+ even though the global economic situation subsequently stabilised and improved. The Barisan Nasional government continued to expand spending after prime minister Najib assumed leadership in Mar 2009, even though stimulus measures were no longer necessary.

The scope for pump-priming and stimulus measures in the face of another slowdown is now limited. But we still have strengths and alternatives: Read the rest of this entry »

2 The Global Backdrop
The world economy is entering another period of turbulence and uncertainty following two years of tentative recovery. It now seems clear that the US-led response of easing monetary policy following the 2008/09 financial crisis bought only temporary respite.

The extensive monetary easing masked the structural imbalances in the world economy and allowed “business as usual” to continue. Asian economies continued to depend heavily on exports, particularly to the developed, western economies.

In the meantime, the US and EU governments recorded huge increases in sovereign debt as they eased monetary policy:

• US government debt has more than doubled since 2008, ballooning from US$7.0 trillion in 2008 to bump up against its original ceiling of US$14.3 trillion in Aug 2011. The ceiling was raised only at the last minute after a bruising political battle between Democrat President Obama and the Republican-dominated Congress; and

• In the European Union, sovereign debt worries are expanding. Starting with Ireland and Greece, concerns extended to Spain and, most recently, Italy. Total sovereign debt of the 27 Euro nations soared 26% in two years to €9.8 trillion in 2010 from €7.8 trillion in 2008.

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CONTENTS

• 1 The Key Thrusts of Belanjawan Kesejahteraan 2012
  • 1.1 Opportunities and Dignity for All Malaysians
  • 1.2 Sustainability
  • 1.3 Empowering Malaysians
• 2 The Global Backdrop
• 3 Malaysia Today
• 4 Policy Highlights
  • 4.1 Spending RM220 billion more effectively, while reducing the deficit
  • 4.2 Prosperity through higher skills, incomes and opportunities
  • 4.3 Subsidy policy to be overhauled: The poor to be uplifted
  • 4.4 Immediate Measures to Help Malaysians
    • 4.4.1 Senior Malaysian Bonus for the elderly
    • 4.4.2 Support for home-makers
    • 4.4.3 Eradicating hardcore poverty

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Snapshots

1. Kesejahteraan Untuk Semua
Belanjawan Kesejahteraan 2012 is a continuation of the collective effort by Pakatan Rakyat to chart a new future for Malaysia, following the releases of the Common Policy Platform in December 2009 and the Buku Jingga in December 2010.

Kesejahteraan Untuk Semua can be only achieved with political will to effect genuine and comprehensive institutional reforms guided by the principles of transparency and good governance.

Malaysia’s diversity is our strength. Our economic growth depends on the solidarity of all people regardless of gender, ethnicity or religion. Only through a budget which is gender responsive, and one that empowers ordinary Malaysians to live a dignified life full of opportunities , will we unleash the full potential of our people.

Recognizing the inflationary pressures on the Malaysian public, Belanjawan Kesejahteraan 2012 creates growth for all through providing policies and frameworks aimed towards uplifting the 60 percent of Malaysian households earning less than RM3,000 monthly.

Introduction of minimum wage, reduction of unskilled foreign workers, upgrading of skills and productivity will massively benefit the Malaysian workforce. In particular, special attention is given to improve women’s participation in the workforce. Wage, skills and productivity will improve in tandem.

Improvements to public transport, housing and healthcare will contribute to increasing disposable income of the people. Higher disposable income will enhance domestic consumption, which is increasingly more important in the volatile global environment.

Monopolies and oligopolies will be broken up, enhancing competition while helping Malaysian businesses to reduce costs. A competitive environment will mitigate inflationary pressures and generate more choices for the people. Read the rest of this entry »