By Wong Chen
In this article, I will be addressing the matter of Budget 2023, prospects for a snap election and the spectre of a global economic crisis in two parts.
In this first part of the article, allow me to address the issue of a snap election derailing Budget 2023.
As most of you know, Budget 2023 was recently brought forward by three weeks and will now be tabled on 7th October 2022. There has been no explanation whatsoever on this move, hence the speculation is that this could be an “election” budget. What this means is that the budget may be tabled, then Parliament immediately dissolved and a snap general election called. If that happens, the election will be held on a day in mid to late November. This snap election possibility is real and persists, despite many concerns raised about the possibility of severe disruptions from floods in November.
In my humble opinion, the move towards a snap election is clearly irresponsible for two broad reasons.
Firstly, a snap election will take away precious government money and civil service resources when these should be channelled to flood preparations. A snap election will need an estimated mobilisation cost of RM1 billion and 100,000 civil servants. The recent Johor state elections alone was reported to cost RM100 million. Has the government simply forgotten the severity of the floods last year where many lives were lost and some RM6 billion of economic damage occurred? In addition, this year, we have witnessed globally an increased in severity of damages from climate change related storms, floods and fires. Thus, we should be prepared this year for the possibility of an even worse flood than last year. So why is the government then irresponsibly toying instead with a snap election?
Secondly, the world is facing an unprecedented economic crisis stemming from the Ukraine invasion by Russia and also by Covid related slowdowns in China. Very rarely, have we seen a situation where both the East and the West are facing simultaneous economic challenges and this raises the spectre of a global economic crisis.
The latest annexation move of Ukrainian territories by Russia is clear evidence that the conflict is far from over and is now entering a new and more dangerous phase. Major economic disruptions in Europe are now a certainty this winter. China on the other hand may bounce back internally from self-imposed Covid lockdowns in November. However, China like and the rest of the world including Malaysia, has very deep economic and trade ties to Europe. So even if China shakes off Covid by November, a Europe in crisis will still negatively impact China’s economic prospects for 2023.
With these big economic challenges, manifesting itself locally in the weakening ringgit, higher inflation, food insecurity and stagnant wages; why oh why is the government still toying with a snap election? Meeting and planning solutions for the impending global economic crisis should be the government’s main priority in Budget 2023. If a snap election is called, Budget 2023 will not be properly deliberated and passed in Parliament. Instead, post the snap election, the new government will likely end up with a temporary emergency budget for the period of Q1 2023. Having a temporary budget to face a global economic crisis, is akin to shooting yourself in the foot before a football game.
In this second part of this article, I will assume we will not have a snap election and discuss some Budget 2023 core issues.
The most important issue for me regarding Budget 2023 is the revenue projections. Despite some positive economic recovery in Q1 and Q2 of 2022 from Covid-19, Q3 has just ended with heightened economic and consumer anxieties. With these anxieties and the East and West economic issues described earlier in this article, government revenue for 2023 is expected to be lower than norm. As such, it is my demand that the government revenue projections in terms of taxes and duties for 2023 has to be truthful and realistic, simply because the entire operating budget expenditure will depend on how much tax the govt can actually collect next year.
The current finance minister, Tengku Zafrul had overinflated the revenue projections before for budget 2021. I sincerely hope that this year, in particular because it will be an election budget, that he does not repeat the mistakes of the past.
Another major contributor to government revenue is Petronas. The government must fully disclose how much additional profits have Petronas made during this oil price hike. To do this Petronas has to amend the Petroleum Development Act 1974 to make Petronas fully accountable to Parliament and not just the prime minister.
On operating expenditure, priority must be given to help the underprivileged B40 with targeted subsidies. The current subsidy system managed in silos by multiple ministries is broken, corrupt and full of leakages. I will call for a total revamp where all subsidies and data related to them, are consolidated and managed by one agency or ministry. The best available and “ready to deploy” subsidy system should be the multiple cash handout systems but I will even recommend utilising the SOCSO system.
As for development expenditure, I urge the government to be extra careful. The coupon rate for Malaysian Government Securities is set to increase next year and this will make the national debt even larger and incrementally less sustainable. With higher rates, the government should then borrow less and make sure whatever development money they spend has zero corruption and mark ups, and that these projects are truly useful and will be able to create economic multipliers.
