8 Public Finance Strategy – the Pakatan Rakyat budgetary framework

8.1 Rationalising Expenditures, Efficiency and Value for Money
The Pakatan Rakyat government will strive to contain expenditures with the ultimate objective of ensuring the long-term sustainability of public expenditures while supporting the continued growth of the economy and the achievement of a high quality of life for all the rakyat.

Rationalising expenditures will restore fiscal space for Malaysia to face future adversities from global perturbations and ameliorate the uncertainties from the accelerating debt burden facing future generations of Malaysians.

In the short-run, while limiting expenditures, Pakatan Rakyat will put in place resolute policies to improve the efficiency of public outlays and simultaneously generate greater value for money. This will bring immediate and direct benefits to the rakyat in the form of better public services (education, health, education and social services), employment prospects, security, and infrastructure.

• In the first instance, the misaligned structure of operating outlays of government would be progressively adjusted to secure greater value and efficiency. For example, subsidy rationalisation and civil service effectiveness;

• Pakatan Rakyat will work with stakeholders on a variety of expenditure reform measures consistent with international best practices to eliminate wastages as well as improve the efficiency and value added for every Ringgit of public resources expended;

• In addition to broadening the transparent procurement policy and procedures already being practiced by several Pakatan Rakyat state governments, the open tender process will be extended to all federal, state, and local level expenditure programs as appropriate. The procurement process will make greater use of on-line procedures and all relevant information on the results of the tender process will be disseminated on a timely basis.

We are confident with the results experienced thus far in States governed by Pakatan Rakyat, that such improved transparency will lead to better price discovery, lower the overall costs for government and deliver the value contracted without delays and undue costs overruns. The open tender process will be accompanied by the mandatory introduction of value management planning for public expenditures above a certain size at all levels of government.

As part of open tenders, value management and improved expenditure controls, Pakatan Rakyat policies would place special attention on performance management, timely completion and limiting costs overrun. Performance bonds of contractors will be strictly enforced and Pakatan Rakyat will make certain that cost-overruns will not be absorbed solely by the government. There will be open dissemination of all pertinent information and stages of completion updates on contracted projects.

Over the medium- to long-term, Pakatan Rakyat will put in place important policy initiatives to strengthen public administration and finances:

• Restore the prestige of the civil service:

  • Human resource practices in the service will be revamped to narrow the gap in salaries, professional challenges and job prospects in order to facilitate themobility of civil service professionals between government and the private sector;

  • This should be accompanied by reform in the civil service pension to make it fully funded and portable throughout the domestic labour market.

• Another significant Pakatan Rakyat initiative will be the introduction of medium- to long-term budgetary frameworks which will give greater credence to and better align the current multi-year planning exercise to the objectives and aspiration to becoming a high-income nation;

  • To directly support this initiative, there must be greater transparency in the reporting and dissemination of public finance information. At the moment, proper reporting on budgetary outcomes at federal, state and local levels lack details, are inordinately late or nonexistent, and accountability for meeting objectives and outcomes is absent;

  • Reports of dissemination of public finance information will be extended to include GLCs and GLICs, especially the financial performance of entities such as PETRONAS. Pakatan Rakyat will ensure that Malaysia avails itself of an assessment under the International Report on Observance of Standards and Codes (ROSC) on fiscal transparency;

• It will be Pakatan Rakyat’s policy to quantify and disseminate all the contingency liabilities facing the government at the Federal and State level.

  • This will lead to a better understanding of the potential losses that could arisefrom potential future expenditures not currently captured in the budgetary process of the government such as contingency liabilities from toll concessions, government guarantees provided to GLCs and other entities, for example, deposit insurance.

  • Thereafter, decisive policies to progressively reduce such identified contingentliabilities should be agreed upon and emergency plans to manage the possibility of the contingent event actually taking place should be developed.

• Pakatan Rakyat will also strengthen the framework of accountability that is grosslymissing from the practices of Barisan Nasional.

  • Strict expenditure monitoring after the national Budget is tabled and approved in Parliament is lacking. This leads to over-spending and the tabling of supplementary budgets to retroactively cover such outlays;

  • Following a review, the Accountant General must submit to Parliament a comprehensive proposal to improve spending accountability byMinistries and public agencies. This will include improvements in the management reporting and budgetary control systems;

  • Such an expenditure accountability system will enable Pakatan Rakyat to institute a mandatory 6-month review of government spending. This review must be tabled for discussion in the Dewan Rakyat;

  • Most importantly, the Auditor General’s annual report must be comprehensively discussed in the Dewan Rakyat so that an action plan for corrective measures can be formulated and agreed upon.

8.2 Making more responsible use of our oil wealth
Oil and gas reserves are finite resources. For the past four decades, our oil and gas riches have cushioned the financial and economic impacts of various global and domestic shocks.

At the current reserve replacement and production rates, it is estimated our oil and gas reserves will last another 20 and 35 years, respectively. The proceeds from our rapidly depleting natural endowment must be better managed and preserved for the benefit of future generations of Malaysians.

Pakatan Rakyat will instill responsible management that adds value to the nation’s oil wealth:

• The present massive gas subsidies to the IPPs and other industries which weigh negatively on Petronas’ financial health will be phased outin conjunction with the revamp of subsidy policies to industry;

• The Barisan Nasional practice of arbitrarily demanding large dividend payments from Petronas will be immediately discontinued;

• Pakatan Rakyat will agree on a formula with Petronas on a reasonable formula for dividends to the federal government. This formula will take into account Petronas short and long-term financial stability including critical reinvestment needs for sustained competitiveness and global presence;

• A percentage of this dividend payment will be deposited into a Heritage Fund to be set up. This Fund will be mandated to invest in strategic areas considered vital to the long-term competitiveness of Malaysia. This will include investments in energy efficiency, renewable energy and green technologies

8.3 Making fuller use of our MP’s expertise, skills and talents
In our system of parliamentary democracy, Members of Parliament, or MPs, are required to provide input and exercise supervision over the Executive, or government led by the prime minister.

The role of the MPs has been increasingly marginalised as the Barisan Nasional government concentrates power in the hands of the prime minister and his cabinet. For example, in the case of the Budget, media and public attention focuses on the Minister of Finance’s Budget speech. After the requisite fawning comments and feedback following the speech on Friday, media and public attention wanders elsewhere.

It is conveniently forgotten that the Minister of Finance gives his speech and tables the proposed Budget for a reason. The proposed Budget is tabled for the consideration and approval of Parliament. It should not be a fait accompli nor a set of unfathomable announcements.

The Budget deliberations are considered so important that no fewer than 18 sitting days, equivalent to nearly a calendar month, are devoted to debate in the “Committee” stage.

In the “Committee Stage”, the budget for each Ministry should be discussed and debated in detail. However, this is currently not possible in Malaysia.

• In first world parliaments, there are actual committees specialising in particular ministries. These committees are made up of MPs from both Government and Opposition;

• In Malaysia, there are no such committees. The entire Dewan Rakyat is the committee. This results in very ineffective debate and absence of effective checks and balances as well and oversight because:

  • MPs do not have the opportunity to develop specialist skills and knowledge in particular Ministries;

  • MPs with knowledge and insights to add may be unable to contribute if they are unable to ‘catch the eye’ of the Speaker;

  • MPs suffer fatigue as Parliament sits until late at night;

  • There is insufficient time as all 25 federal ministries have to be covered by the same “committee” (the whole Dewan Rakyat) in just 18 days.

Pakatan Rakyat considers the input of MPs as very important. MPs represent the interests of the rakyat. Pakatan Rakyat will implement proper “Committee Stage’ debates:

• For a start, 7 Committees will be formed. These Committees will include a mix of Government and Opposition MPs in a similar proportion to Parliament as a whole;

• Committee members will be given allocations to employ parliamentary research assistants to improve their effectiveness.

Pakatan Rakyat believes this will result in Budgets that are more effective and reflective of the wishes of the rakyat:

• As time goes by, long-serving MPs will develop specialist expertise and experience which will enable them to ask pertinent questions and provide useful input;

• As the committees are smaller, MPs can participate meaningfully. Also, Committees facilitate less partisan and more productive interaction, unlike in the full Dewan Rakyat where Government and Opposition are expected to ‘cross swords’ or are prone to ‘show-boating’.

Pakatan Rakyat proposes the following 7 Committees and the current Ministries they will oversee:

1. National & International Affairs
   • Prime Minister’s Department
   • Ministry of Foreign Affairs
   • Ministry of Information, Communication and Culture
   • Ministry of Federal Territories and Urban Wellbeing
2. Economics & Finance
   • Ministry of Finance
   • Ministry of International Trade and Industry
   • Ministry of Domestic Trade, Cooperatives and Consumerism
   • Ministry of Tourism
3. Security
   • Ministry of Defence
   • Ministry of Home Affairs
4. Education, Talent & Employment
   • Ministry of Education
   • Ministry of Higher Education
   • Ministry of Human Resources
5. Agriculture and Regional Development
   • Ministry of Plantation Industries and Commodities
   • Ministry of Agriculture and Agro-based Industry
   • Ministry of Rural and Regional Development
6. Infrastructure, Resource Management & Environment
   • Ministry of Works
   • Ministry of Natural Resources and Environment
   • Ministry of Science, Technology and Innovation
   • Ministry of Energy, Green Technology and Water
7. Community Wellbeing
   • Ministry of Transport
   • Ministry of Housing and Local Government
   • Ministry of Health
   • Ministry of Women, Family and Community Development
   • Ministry of Youth and Sports

[Pakatan Rakyat Budget 2012 released by Datuk Seri Anwar Ibrahim on behalf of PR in Kuala Lumpur on 4th October 2011. Part 9 of 10]