Wednesday, November 12, 2014

Will Malaysians choose the Red Pill or the Blue Pill?

Morpheus: It is the world that has been pulled over your eyes to blind you from the truth.
Neo: What truth?
Morpheus:That you are a slave, Neo. Like everyone else you were born into bondage. Into a prison that you cannot taste or see or touch. A prison for your mind.
Morpheus:This is your last chance. After this, there is no turning back. You take the blue pill - the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill - you stay in Wonderland and I show you how deep the rabbit-hole goes. (The Matrix)

Malaysians have taken the road of racism for 57 years because our minds have been imprisoned. A leader may show us a path to a better tomorrow but we will miss the turning if we cannot liberate ourselves from the prison of our minds. Only by choosing good over evil can we see the true path. The time for choosing has come.
After seven days hearing submissions from the defense and the prosecution, the five Federal Court Judges will decide whether to acquit or convict Anwar Ibrahim. If Anwar is convicted, he will be imprisoned for a term that will end his political career. The opposition leader said this is his final sacrifice, his last final service for Malaysians. He will not be silenced. But will Malaysians grasp the opportunity he paid for with his freedom?

Whether there are flying carpets, briyani suits and what happened to the missing KY jelly is for the court to decide. The target audience for the remake of the stage production of Sodomy I, updated by DNA forensic investigation replacing the old fashion mattress prop, is not the court. It is always the Malaysian public especially the Malay Muslims. The impresario, whoever he or she may be, thought Malaysians are either gullible or easily intimidated or both. Now Malaysians will show whether they are indeed a timid and feeble-minded audience or they are bold and resolute judges firmly punishing evil and rewarding the good. Malaysians will have to decide whether to take the red pill or the blue pill.

The red pill and its opposite, the blue pill are popular culture symbols representing the choice between embracing the sometimes painful truth of reality (the red pill) and the blissful ignorance of illusion (the blue pill). The term is popularized in the 1999 film, “The Matrix”, where the main character Neo (Keanu Reeves) is offered the choice between a red pill and a blue pill. The blue pill would allow him to remain living in the “ignorance of illusion”, while the red pill would lead to living in the “truth of reality” even though it is a harsher, more difficult life.

Americans chose the red pill when Martin Luther King Jr was shot. The civil rights movement marched on because they knew oppressors would never give up their privileges on their own. President Johnson in his speech before Congress to pass the Voting Rights Bill allowing men and women to vote whatever the colour of their skin said:

“The real hero of this struggle is the American Negro. His actions and protests, his courage to risk safety and even to risk his life, have awakened the conscience of this Nation. His demonstrations have been designed to call attention to injustice, designed to provoke change, designed to stir reform.”

In 2008, America elected a president based not on the colour of his skin but on the content of his character. They had overcome.

South Africans chose the red pill when Nelson Mandela was imprisoned. For the 27 years he was in jail, South Africans continued his struggle for freedom and equal opportunity. They fought for the idea, which Nelson Mandela in his statement from the dock said:

“Was one he cherished, he hoped to live for but if needs be which he was prepared to die for.”

Internal resistance to apartheid came from organizations dedicated to peaceful protests, passive resistance and armed insurrections. It came from Steve Biko, Bishop Desmond Tutu, white activists like Harry Schwarz, Joe Slovo and Trevor Huddleston. It came from the Black Sash, an organization of white women against apartheid. It came from students and churches. In 1994 the long walk for freedom was finally over, apartheid ended.

Anwar chose the red pill 16 years ago when he rejected the offer to go away quietly and instead took the path of “reformasi”. It took him from the heights of being the acting Prime Minister to the depth of being the lowest convict. On his release from prison, he crafted the New Economic Agenda for affirmative action based on needs and not on race and to restore the country’s international competitiveness. On his qualification to stand for election, he announced on 15 April 2008 at Kelab Sultan Sulaiman Kampong  Baru, the venue where Malay nationalists gathered to fight for independence, that while the constitutional rights of Malays would be protected, it was time to change from “Ketuanan Melayu” to “Ketuanan Rakyat”, The Eight of March  2008 General Election proved to be the birth of a new era where the mill stone of race and religion which had been Malaysians’ burden to bear was finally shattered and transformed the political landscape of the nation. In 2013, Pakatan Rakyat secured 89 parliament seats and won 52% of the popular vote but was thwarted by gerrymandering, malapportionment and unfair electoral practices from forming the government.     

When Anwar chose to awaken Malaysians to give them hope that there can be another Malaysia, he was fully aware he would be challenging the twin pillars of UMNO politics, the first is Malay unity must be maintained at all costs and the second is that UMNO’s dominant political position must be maintained. Anwar was aware that those who left UMNO would be ostracized and made an outcast of his community. UMNO had accused Dato’ Onn Jaafar, the father of Malay nationalism and founder of UMNO as having sold out Malay rights and his heritage when he formed the multi-racial Independence of Malaya Party (IMP). Dato’ Haji Zainal Abidin bin Haji Abas, who with Dato’ Onn was one of UMNO’s founders and its first General Secretary became another example of UMNO’s punitive deterrence. He left UMNO to join IMP and later became the chairman of the United Democratic Party. He was completely alienated from the community. Aziz Ishak, once out of UMNO was hounded, all kinds of charges were laid against him and he was later arrested under the Internal Security Act. However, nothing prepared Anwar for what they did to him, he was arrested, beaten, imprisoned, ridiculed and denigrated by scurrilous attacks against him and his family, ostracized, made an outcast and labeled a traitor to his own race. The rancorousness of the venom, the ferocity of the hatred and the viciousness of the attacks were at levels never seen before. He is now more prepared mentally but physically he is not as strong and as young as he was one and a half decades ago.   

If you choose the blue pill you will carry on in your blissful ignorance of illusion.

You can choose to ignore and jettison the teachings of your religion, Islam, Christianity, Hinduism, Buddhism, Taoism or other faith and ignore your conscience not to harm your fellow men or to help him because the “common good” of your race demands that you disregard the needs of those of a different colour or religion. But what are you going to say to Him on the Final Day when he reminded you in the 179th verse of the 7th Chapter:

“And We have certainly created for Hell many of the jinn and mankind. They have hearts with which they do not understand, they have eyes with which they do not see, and they have ears with which they do not hear. Those are like livestock; rather, they are more astray. It is they who the heedless.”

The illusion however, demands that your life as an individual belongs not to you but to the group or society and in this case, to your race of which you are merely a part, that you have no rights and  must sacrifice your rights, your values and goals for the greater good of your race.

The illusion further demands you are not to question why but to do and die. You are not to question what is the greater good for the Malays for one person to control Malakoff Corporation, Gas Malaysia, Aliran Ihsan Resources (water utility), Port of Tanjong Pelepas, Johor Port, Senai Airpor Terminal Services, SMART Tunnel, MMC-Gamuda, Proton Bhd, Edaran Otomobil Nasional, MODENAS, Honda Malaysia, Bank Muamalat, PUSPAKOM, Alam Flora, POS Malaysia, Defence Technologies, Tradewinds (M) Bhd which subsidiary BERNAS has a monopoly of rice importation and distribution, Central Sugar Refinery and smaller stakes in Malaysia Sugar Manufacturing which together holds a monopoly for sugar, hotels and property development companies.    
The illusion demands that the individual sacrifice you are called upon to make is for the common good for the greatest number of your race. Your income from 2009 has risen by only 8.1% while your household expenditure increased by 12.1% and 88.6% from 1994. Your household expenditure for housing, water, electricity has gone up by 102% since 1994, transport 94.6%, food and drinks by 60.9% while your household debt has increased by 13%. It is difficult to make ends meet with the increased price of petrol, the higher tolls for privatized highways and bridges, the tariffs for the privatized water and electricity, even your rubbish and sewage collection have been privatized. You have no idea how to pay the increased school bus fares but you will be proud that you have contributed to the many monopolies owned by Syed Mokthar Al-Bukhari, one of you.  

The illusion says your sacrifice in being unable to afford your own home is for the greater good. While you are seeking to rent a house, the rent-seeking elite buys luxury bungalows and condominiums. After payment of the car installments, credit cards, food and other bills you have no money for emergencies much less a holiday while the elites are flying first class and staying in five star hotels.

The illusion says your government has provided your children with a university education but they are not employable. The June 2014 World Bank Malaysian Economic Monitor reports 60% of the unemployed are aged 20-24 and 25% are graduates. Your children hold a university degree but employers find they lack soft skills; 47% inability to work independently, 49% lack problem solving skills, 51% lack analytical skills, 56% lack creative/critical thinking and 81% lack communication skills. According to the Programme for International Student Assessment (PISA) 2012 Malaysian students rank 52 out of 65 countries and the bottom one-third among more than 70 countries in international assessments like Trends in International Mathematics and Science Studies (TIMMS). The results show the education standard of our 15 year olds are three years behind Singapore, Korea, China, Japan and even Vietnam.    

No matter how you seek to justify you cannot ignore that while a responsible government builds a floor for the weakest students to stand, it encourages the best and the brightest to fly as high as they can. It is wicked to clip their wings because 150 years ago their great grand parents came to work in the estates, railroads, tin mines or to seek a better life.

While all accept that the Malays and the natives of Sabah and Sarawak are disadvantaged and neglected under colonial rule for more than 200 years and ought to be assisted what justification is there to allow Pakistanis, Bangladeshis, Indonesians and Filipinos who came yesterday to enjoy these same privileges so the elite can maintain power? 

The blue pill unfortunately, will not be able to provide the answers and will not save you from the rude awakening one day when Malaysia ends up like Rwanda, Serbia, Sri Lanka or Zimbabwe.

If you choose the red pill, you will realize the painful truth that you yourself are part of the oppressed and you must fight for your own freedom and not that of the elites who can hardly claim to be identifiable with you.

Your life as an individual belongs to you and you have an inviolable right to live it as you see fit, to act on your own judgment, to pursue the values of your own choosing. The basic tenet is that each individual has an inalienable right to the pursuit of his own happiness in a society where men and women deal with one another as equals. The only happy society is one of happy individuals. We cannot have a healthy forest made up of rotten trees.

You will recognize that no race holds a monopoly of beauty, of intelligence, of strength and there is more than enough room for all in this country. You will understand what Malcolm X said:

“I believe that there will ultimately be a clash between the oppressed and those who do the oppressing. I believe that there will be a clash between those who want freedom, justice and equality for everyone and those who want to continue the system of exploitation. I believe that there will be that kind of clash, but I don’t think it will be based on the colour of the skin”      

Anwar has given Malaysians the keys to the door of change, if Malaysians grab hold of them once opened the door cannot be shut but if Malaysians do not use them once shut the door cannot be opened.

What will you choose reality or illusion?

William Leong Jee Keen
Member of Parliament Selayang
12 November 2014

Monday, August 11, 2014

MKini报道: 银行债案与水供重组争议 公正党九十页报告批卡立

Sources From:










“3月19日,丽阳机构(Tropicana Corporation Bhd)宣布,把本身从雪州政府手里买下的308.72亩地段,脱售给(相关公司)。”








公正党会议纪录显示,卡立宣称,“有一名来自沙地阿拉伯拉吉哈银行(Al Rajhi Bank)的朋友愿意帮忙,惟恐防泄露详情,故不便相告”。








公正党争论的其中一点,是雪州政府在最终的水供重组献议中,给雪州水供公司与商业高峰的最大股东罗查里(Rozali Ismail),总值5亿6800万令吉的赔偿。





另外,这份文件也阐明,部落客拉惹特拉(Raja Petra Kamaruddin)曾撰文指责公正党实权领袖安华与策略主任拉菲兹,暗中得到雪河水供公司的佣金。

“拉惹柏特拉的弟弟,正是卡立在雪州政府的得力助手——拉惹依德利斯(Raja Idris Kamaruddin)。卡立也委任拉惹依德利斯为雪州政府投资臂膀——达鲁依山集团的总执行长。”






Friday, July 25, 2014

MP Selayang Speech on Special Parliamentary Session: Debate on the MH17 Tragedy

Special Parliamentary Session: Debate on the MH17 Tragedy

The Honourable Tan Sri Speaker,

On 17 July 2014, flight MH17 from Amsterdam to Kuala Lumpur was believed to have been shot down by a surface to air missile near the Ukrainian Russian border, killing 298 innocent men, women and children. It was murder and a crime against humanity. Shock, grief and anger are felt throughout the world. The whole world condemns this senseless shooting down of MH17. It cannot be forgotten. It cannot be forgiven and it cannot be allowed to happen again.

I extend on behalf of my colleagues from Keadilan and Pakatan Rakyat, our condolences and deepest sympathies to the family members and friends of the passengers and crew of flight MH17.
I acknowledge with gratitude the Honourable Prime Minister’s quiet efforts in obtaining Alexander Borodai’s agreement, the separatist leader having control of the wreckage site, to release 282 bodies to Netherlands and for the bodies of Malaysian citizens to be sent home. It was an audacious move but it produced a good outcome.

I also thank the Australian Government, especially its foreign minister Ms Julie Bishop, for her tireless efforts in obtaining the UN Security Council members’ unanimous approval to her resolution calling for a complete international investigation into the downing of the MH17, demanding the responsible parties to be held to account and for the separatists to refrain from compromising the integrity of the crash site.
Although the UN Security Council has called for a thorough investigation, there are still many challenges and much to be done before the victims of MH17 and their families obtain justice.

Malaysia is entitled to commence an action before the International Court of Justice against those responsible for breaching Article 3 of the Chicago Convention in attacking a civilian aircraft. This will be claim for compensation and damages. Although the compensation will help the victims’ families, money is not an adequate substitute for the lives so cruelly taken away. The perpetrators must answer for their crime. The perpetrators must be given a severe punishment, one that reflects the horrific viciousness and cruelty of their senseless crime.

What the perpetrators committed is a war crime. Under the laws of war, combatants must distinguish between a military and a civilian object. Combatants cannot target civilians. It is a rule of international law that combatants must ensure the target is not a civilian aircraft before attacking it. If those who shot the missile were aware that MH17 was a civilian aircraft they have clearly committed a war crime. They have violated International Humanitarian Law and the Geneva Convention for attacking civilians.

Unfortunately, as Lembah Pantai (Nurul Izzah Anwar) has pointed out, Malaysia is not a signatory to the Rome Statute of the International Criminal Court and therefore not a member of the International Criminal Court (“ICC”) that is empowered to investigate and prosecute crimes against humanity and war crimes.

Malaysia must therefore depend on the UN Security Council to refer the case to the ICC. Malaysia has to call on the 15 UN Security Council members in particular the 5 permanent members to carry out their responsibility by exercising their powers to allow a complete investigation. They must find the political will not to protect or obstruct these criminals from being prosecuted.

Unfortunately, history has shown that politics often come in the way of justice. There have been no less than 40 incidents of civilian air planes having been shot down by military forces but no one has been charged much less convicted.

On 27 July 1955 an Israeli commercial flight was shot down by Bulgaria, all 58 passengers and 7 crew members were killed. Israel’s suit before the International Court of Justice failed because it did not have jurisdiction over Bulgaria which was not a party to the convention.

On 21 February 1973, Israel shot down Arab Airlines Libya carrying 113 passengers of which 108 were killed. No one was charged.

On 1 September 1983, USSR shot down Korean flight KL007. The Soviet Union suppressed evidence and the flight recorder sought by investigators were only released 8 years after the Soviet Union collapsed.
On 3 July 1988, a US warship at the Persian Gulf shot down Iranian Airline flight 655 killing all 290 aboard. The majority of the passengers were on the way to Mecca to perform the Haj. There is evidence to suggest USA failed to take steps to identify the air plane. USA did not admit responsibility although it paid compensation on an “ex-gratia” basis.               

In these circumstances, Malaysia faces a huge challenge to prosecute the perpetrators. I call on the Prime Minister and the Government to stand firm before the two Great Powers, America and Russia in demanding justice for the victims of MH17.

I hope US President Barrack Obama will act in accordance with the words of his speech given in Belgium on 26 March 2014 that the United States will respect and will act together with the small nations to enforce international law. He said:
“And our enduring strength is also reflected in our respect for an international system that protects the rights of both nations and people – a United Nations and a Universal Declaration of Human Rights, international law and the means to enforce these laws. But we also know that those laws are not self-executing. They depend on people and nations of good will continually affirming them…so that majorities cannot simply suppress minorities and big countries cannot simply bully the small”

President Obama was speaking about Russia’s violation of international law regarding Ukraine and the pro-Russian separatists but the violation of international law in the shooting down of MH17 is just as serious if not more. So I hope President Obama will enforce international law against the perpetrators whoever they may be.

I also hope that Russian President Vladimir Putin will also live up to what he said. He said no country should use the MH17 tragedy for their “narrowly selfish political goals” and to provide full co-operation to the experts investigating the tragedy. It is hoped that President Putin will ensure no country will for its own political goal prevent or obstruct the perpetrators of this terrible crime from being brought to justice.

We must ensure this tragedy will not occur again. After the KL007 incident, the international community and ICAO agreed to the Montreal Protocol of 10 May 1984 where pursuant to Article 3 bis States are not to use weapons against civil aircraft in flight. Despite this Protocol, an Air Malawi passenger flight was shot down on 6 November 1987 during the Mozambique civil war, the on US shot down Iranian Air Flight 655 during the Iran-Iraq conflict and on 4 October 2001, a Russian passenger flight with 78 people aboard was shot down by a missile by Ukraine and now MH17. The Montreal Protocol is not sufficient to stop these killings.

The present state of aviation law is insufficient and incomplete to prevent military forces both government and non-government from shooting down civilian aircraft on the ground of national security or self-defense. It is still an era of “might is right.” To destroy a non-threatening civilian aircraft killing innocent passengers and then attempting to justify such a barbaric act by using as an excuse national security is rubbing insult to injustice. There must be a way of preventing such slaughter.    

MH 17 requested Ukrainian Air Traffic Control for permission to climb to 35,000 feet but this was refused and it was directed to maintain its height at 33,000 feet. MH17 was flying over a war zone because everyone from the ICAO to the Ukrainian Air Traffic Controllers thought the combatants did not have the capability to shoot down air planes at this height. All were deadly wrong. If they had known this tragedy would have been avoided.

I suggest a new provision for ICAO to require combatants to declare their military capabilities and to issue a prior warning that the air space is a “no fly zone”. Failure to do so will be a war crime. I suggest Malaysia lead in calling for this change to make the sky a safer place.

The Honourable Prime Minister said this morning “Let us walk together” I answer “We will walk with you to seek the truth and to obtain justice for the victims of MH17” I ask all Malaysians to stand together to bring the criminals to justice and to move as one in making this world a safer place.

I support the motion. Thank you.

William Leong Jee Keen
MP Selayang

23 July 2014

Thursday, April 10, 2014

Passing of GST : Sparing the Rod and Spoiling the BN Government by William Leong Jee Keen Member of Parliament Selayang

On 7th April 2014 with time enough for only 10 MPs on each side to debate, the Goods and Services Tax Bill 2014 was pushed through by a vote of 118 to 81. Malaysians, rich, middle class and poor will from 1st April 2015 pay the same rate of 6% add-on tax on their consumption of goods and services.

Straw man Arguments
The Government relying on their 133 majority offered 2 unconvincing arguments for adopting GST. The first argument is GST will not hurt the people because it replaces the Sales and Services Tax (“SST”) which has higher rates of 10% and 6% respectively. It is a straw man argument. Malaysians will soon painfully discover that this argument is a fallacy. GST is a far more burdensome tax than SST. Unlike SST which is a tax paid at the level of the final production or supply of the service, GST is payable at every level of the supply chain and finally borne by the consumer. GST also applies to many more goods and services than SST. The second argument is that 160 countries have adopted GST and therefore GST must be good. This is a jumping on the bandwagon kind of argument appealing to those with a herd mentality. Those who follow this argument will like the lemmings when they fall off the cliff find out, too late, that the rest of the countries who did not adopt GST or abolished it were right.

Now that parliament has passed GST, I wish to point out three reasons Malaysians should press for GST’s abolition. 5 countries have abolished GST: Vietnam (in the 1970s), Grenada (introduced 1986, dismantled shortly thereafter), Ghana (introduced March 1995, removed two months later), Malta (introduced 1995, removed 1997) and Belize (introduced 1996, removed 1999). [Three of these countries have since reintroduced the tax; Ghana in 1998, Malta and Vietnam in 1999].       

The 1st Reason: GST does not solve the real deficit problem but will make it worse
There is an old saying “spare the rod and spoil the child”. We know it does not apply in Sweden and I offer my sympathies to the Malaysian couple, Shawal Norshal and Azizul Raheem Awalluddin who have been convicted. However, for us in Malaysia, discipline is important. It is more important when it comes to public finances. The Federal Government must exercise fiscal discipline to address the deficit problem. If we allow the Federal Government to raise additional revenue through GST this will undermine the discipline needed to address the real cause of the problem. The real cause of the problem is not insufficient revenue. It is the uncontrolled and runaway operating expenditure. The Edge provided a useful analysis: [1]

In 2012, the Federal Government revenues crossed RM200 billion for the first time but expenditure also for the first time crossed RM250 billion. The Federal Government collected RM207.913 billion, an increase of 12.1% from 2011. Income tax revenue increased by 13.9%, customs duties by 6.4%, petroleum income tax by 22.3%. However, the federal operating expenditure for 2012 was RM207.91275 billion and RM46.932 billion for the development budget. The government has since 1999 been on a spending binge and government finances deteriorated. Although revenue was sufficient to cover operating expenditure it was insufficient to meet the development expenditure needs. The Federal Government had to finance the difference through borrowing. This has resulted in 14 consecutive years of budget deficit which by 2012 had ballooned to RM501.617 billion amounting to 53.50% of GDP.

From 1988 to 1997 the surplus of government revenue to operating expenditure grew every year. It peaked at RM21 billion in 1995. During this period, operating costs were kept in check. From 1970 to 1999 total federal operating expenditure increased from RM2.2 billion to RM45 billion. This is over 30 years. In the 13 years after 1999, operating expenditure has shot up to RM207 billion. The biggest single year increase was 2008 when operating expenditure jumped by 29%.  The total operating expenditure last year rose 13%.
The largest component of the operating expenditure is emoluments with pensions and gratuity, it accounts for 36%. From RM18 billion in 1999, it now stands at more than RM74 billion, growing at a compound rate of 11.5%. In 2008 civil servants’ payroll grew 26% and last year by 20%. Salary increases are permanent and will lead to higher pensions and gratuity payments later.

Subsidies account for 21% of the total operating expenditure. It grew from RM1.1 billion in 1999 to RM44.1 billion in 2013 at a shocking compound growth rate of 33%. In the 28 years from 1970 to 1997 total subsidies exceeded RM1 billion only on three occasions, 1981 to 1983. In contrast, in 2008 subsidies shot up from RM10.6 billion to RM35.2 billion.

From 1999 to 2012, supplies and services grew from RM6.1 billion to RM32 billion. In 1986, the amount was only 2.6 billion. In other words, for the 13 years before 1999, the amount grew 135%.  For the same period of 13 years after 1999, the amount exploded by 425%.

If the expenditure had been put to good use and provided good returns the rising expenditure could have been justified. However, a look at any of the Auditor-General’s Reports for these past 13 years will show the substantial leakages, wastages and corruption. The leakages and wastages is estimated between RM28 billion to RM40 billion a year. Providing the Federal Government with an additional stream of revenue will not solve the fiscal deficit problem. The estimated net revenue generated from the 6% GST is only RM3.87 billion. The deficit problem can only be resolved by instituting cuts in the operating expenditure and ending the leakages, wastages and corruption. Any gain from GST will be undone if the wastage, leakages and corruption continue unchecked. On the same day that GST was being debated the Auditor-General’s 2013 Report was put on the MPs table. It highlighted weaknesses in improper payment, unreasonable delays in completing contracts, unreasonable prices and made 109 recommendations for correction. These recommendations will now gather dust because there is GST to provide the money to carry on the squandering and profligacy. 

With parliament having allowed GST, there will be no incentive to rein in excessive expenditure and the leakages. A government typically prefers to allow higher spending than making the hard decision to cut expenditure. Those supporting GST would typically acquiesce to higher rates of GST from time to time. There is no more toxic economic potion than the mixture of executive need for increased spending, rubber-stamping parliament acquiescence and the adoption of GST. Greece is an example of what can happen. Access to a powerful revenue raiser like VAT could not protect it from financial crisis when it lacked the discipline to cut expenditure. The situation is like the Government is filling up a bucket of water with a hole in it. Parliament instead of asking the Government to patch up the hole gives it a second pipe. The hole will never be repaired. Parliament in sparing the rod is spoiling the BN Government.  

Further, GST will exacerbate rather than solve the problem of too much government borrowing. Barisan Nasional MPs like Jasin argued that Malaysia should adopt GST because 160 countries have done so. Countries that have to be bailed out, as well as those teetering on the edge of fiscal collapse - including Greece, Spain, Portugal, Ireland and Italy - all have GST. Prior to the 1960s, before the introduction of GST, the European countries had debts on a percentage of GDP below that of the United States of America. Since the introduction of GST, the average debt level of these Western European countries is higher than the US debt level. According to IMF, the public debt of USA is 106% of its GDP, Greece – 158%, Spain – 84%, Portugal – 123%, Ireland – 117%, Italy – 126%, Japan – 208% and Singapore – 111%. For all intents and purpose, the experience in Europe confirms Milton Friedman’s famous warning that:

“In the long run government will spend whatever the tax system will raise, plus as much more as it can get away with.”

Based on the experience of the 160 countries GST will not solve the fiscal problems but in fact will make it worse.

The 2nd Reason: GST will lead to harmful effects on the economy
GST will cause consumption to be reduced, lower the GDP and Malaysians will be worse off. GST being a tax on consumption will reduce consumption and lead to a negative effect on the GDP.

At the initial rate of 6%, the impact will be painful but tolerable. However, IMF in its March 2014 Report said that the 6% GST rate is low because it is only a starting point. At 6% it will not have a significant impact on the Government’s revenue and will have to be increased after the tax is operational. IMF said that in fact many countries have increased the GST rates after its introduction.

Based on the experience of the ten largest countries that adopted GST, the average GST rate has risen from 10.7% at inception to 16%, an increase of more than 50%. The average rate of the Organization of Economic Co-operation and Development (OECD) is 18%. The United Kingdom increased to 20% in January 2011.

For GST to generate higher revenue, a combination of base broadening and rate hikes have to be considered. These measures will in turn mean a higher impact on growth. Once the rate is increased it will have a negative impact on the GDP. The increased rates will increase the consumers’ burden through higher consumer prices. As a result private consumption will fall. By increasing prices GST will reduce real wages.

Ernst & Young in a 2010 study “The Macroeconomic Effects of an Add-on Value Added Tax” prepared for the National Retailers Federation of the United States found that an add-on VAT of 10% enacted to reduce the deficit would result in a loss of 850,000 jobs, a loss of US$260 billion in retail spending and a 2% drop in the GDP in the year of enactment.

Malaysia will not suffer such losses but the risk of a significant negative impact is there. GST will kill the golden goose which is private consumption in Malaysia. According to the 2013/2014 Economic Report consumption or domestic demand is the key driver of growth led by private consumption and investments. The Government is relying on private consumption supported by household spending to lead GDP growth. GST will dampen this growth. This is clear following the effect of structural adjustment measures such as subsidy rationalization. The Nielsen Consumer Confidence Index for the 4th Quarter of 2013 dropped 98 points, the lowest in three years. Over a third of the Malaysian consumers surveyed cited the economy as a concern followed by increased in food prices (24%). MIER also reported its Consumer Sentiments Survey and Business Conditions Survey plunged to the lowest in five years. MIER warned that with the emerging weaknesses in consumer spending domestic demand will be affected. Due to the economy facing serious challenges with the slow recovery from   global recession and the unsettling effects of quantitative easing, the effects of subsidy rationalization and implementation of minimum wages, the adoption of GST will be too much of a shock to our system and may very well be the proverbial “final straw”.    

The 3rd Reason: GST will hurt the Lower and Middle Classes
GST is a highly regressive tax, hitting lower and middle classes much harder than wealthy families. GST will put further financial stress on the 56% of Malaysian households whose monthly income is less than RM3,000. GST will result in an increase in the tax burden of the middle-income families. GST-induced price hikes would compel households to search for cheaper goods and services. However, 60% of the Malaysian households will find it difficult to substitute basic necessities and essential services. The Federal Government in an attempt to reduce the regressivity of GST has provided for exemptions and zero-rating for certain basic goods for the poor. However, the World Bank in a paper entitled “Value Added Taxation: Mechanism, Design and Policy Issues” in acknowledging that VAT (GST) is inherently regressive stated that attempts to reduce it though exemptions and zero rates have proven ineffective. It is indeed impossible to do so because one cannot segregate food, goods and services consumed by the poor from those consumed by the rich.

In any event, it appears the Federal Government has not carried out an in-depth study of the foods and services that would reduce the GST burden of the poor. The Federal Government in the list of zero-rated foods included trout, Pacific salmon, Atlantic salmon and Danube salmon, Norway lobster, rock lobster, crayfish and oysters while canned sardines, baked beans and instant noodles are liable for the full tax.

The apparent mismatch in the zero-rated items reveals the Government’s poor sensitivities and lack of knowledge of the people’s needs. The GST regime reminds one of the saying attributed to Marie Antoinette, Queen of Louis XVI of France. Upon being informed that the citizens of France had no bread to eat she replied with “let them eat cake.” The French revolutionaries didn’t think too much of her idea of “People First Performance Now” and put her to the guillotine. What shall we do with ours?

Subsidy rationalization and GST are the chickens coming back to roost for Malaysians. Malaysians have voted BN to rule for 56 consecutive years ignoring their extravagance, recklessness, wastefulness and corruption. The future generations of Malaysians will have to pay for the sins of their fathers and mothers unless we can win over the 47% who retained BN before the next elections. It is hoped that the pinch in their wallet will wake them up.      

[1] Against the Wind: Fixing the budget deficit is critical and it requires a political consensus by Tong Kooi Ong and Chan Jian Ming The Edge 20 October 2013