Budget 2015 loopholes: What is beyond Petronas?October 18, 2014
Budget 2015 loopholes
What the official economic papers do not tell, if you study it well, is the fact that beyond Petronas money, there are not many sources of income generation that could replace oil and gas in the immediate.
Budget 2015 was supposed to be about reducing the country’s independence on Petronas, which is the biggest earner in terms of its oil and gas revenues.
To achieve this, the government took some concrete measures that are seen as being in the right direction to depart from the dependency on oil money, certainly for government or public expenditures. It is also part of the nation’s survival that the government has to cut down subsidies, implement policies that will increase tax payments – in particular the alienated goods and services tax (GST).
In the current scenario, survival is not only an economic imperative, but political and social as well. The removal of subsidies and the implementation of the GST, however tough and unpopular decisions they are, carries the risk of backfiring in the long run.
While the authorities are clamouring that the economy is doing fine, the fact remains that it is still too heavily dependent on Petronas.
The problems Malaysia will face in the long run, is that its real economy of the people, will not tally with the expectations of the government. The gap between the cost of living is growing at such rapid pace, that the people are feeling the big dent in their pocket while salaries – according to employment analysts – will not grow to the people’s expectations.
What the official economic papers do not tell, if you ask me, is the fact that beyond Petronas money, there are not many sources of income generation that could replace oil and gas in the immediate.
As one expert who was on record during the Perdana Leadership Foundation CEO Forum 2014 held at the Berjaya Hotel in Kuala Lumpur said, Petronas is facing the pressure with the government asking for more and more of its revenues. The fact remains that most of the government’s expenses come from Petronas, and it is badly needed surely to cater for public debt, public infrastructure and other government largesse.
It is said that the GST will solve the problem of government over-dependency on Petronas, but that will not solve the entire problem since GST will only bring an additional RM690 million in revenue to the government coffers. This does not really relieve the pressure on Petronas.
Besides this salient issue, Malaysia is also facing a tough political problem with the authorities pushing harder for Anwar Ibrahim, the opposition leader, to be jailed on account of the Sodomy 2 saga. The case took a sudden turn when the earlier victory of Anwar Ibrahim against the prosecution was overturned by the Court of Appeal. Anwar himself is said to be certain he will face jail term come the October the 28th when his appeal is heard in the Federal Court.
While the government is doing everything to muzzle its opponents with the Sedition Act, the underground economy has seen massive growth, to the extent that experts believe it is even bigger than the ‘real economy’. At the Perdana Leadership CEO Forum, a panel of expert said the underground economy or shadow economy was too big to fathom.
And the government, through Prime Minister Najib Tun Razak in his annual press briefing before delivering the Budget 2015 said the GST will bring the ‘black money’ into the ‘white money’ system. He meant the underground operators will have to pay the GST which will in turn give an insight to the income tax department on the size of the underground economy.
The recent budget 2015 did not address the problem of dependency on Petronas fully, as it leaves loopholes and shows that the economy is struggling in other major sectors including tourism – which is facing the full brunt of the two Malaysian Airlines incidents – and SMEs, a sector which is facing a glut.
Alongside these loopholes, there is also the problem faced by the lack of a quality workforce, thus the Budget 2015 has addressed the issue of the lack of PhD holders in Malaysia. The government has launched a program that intends to produce 60,000 PhD holders in the country, but will that resolve the problem of quality workers that is badly needed by Multinational Corporations that has Malaysia in their investment strategy?
Besides, the increase in the number of BR1M’s recipients is alarming, as it could allude to a grim reality. The question is whether Malaysia now has more people struggling to make ends meet?