Two Reasons for Rejecting Budget
This
article seeks to respond to a few statements circulating in the social media
that the opposition voted against the 2017 Budget to prevent the people, especially
the poor, from enjoying the benefits bestowed to them by the Finance Minister. There
are many reasons the opposition voted against the Budget. I wish to highlight
only two. The Finance Minister lacks the legitimacy to be entrusted with the continued
management of the people’s money and the 2017 Budget reveals his misplaced
priorities.
Lack of Legitimacy
The
core of public finances is that some people spend other people’s money. In
democracies, voters delegate the power over public spending and taxes to
elected politicians.[1] The delegation of power to
elected politicians implies that except for those of the highest integrity there
are risks the politicians will extract rents from being in office and spend
public money on projects other than those voters desire.
One of
the tools for ensuring the people’s money is spent in accordance with the
people’s desire is the budget. The budget is a contract between the voters and
the Government showing how resources are raised and allocated for delivery of
public services. The budget is the primary instrument for implementing fiscal
policy thereby influencing the economy as a whole and how the Government plans
to turn aspirations into reality.[2] The budget is the
reflection of the policy and priorities of those who control and manage
government machinery and apparatus at the given time. As a consequence budget
transparency and accountability are very important means to truly democratize
government and processes of governance.
Accountability
denotes the rights, responsibilities and duties that exist between the people
and the government institutions. Accountability and legitimacy are two sides of
the same coin. Lack of accountability will result in lack of political
legitimacy. Lack of legitimacy will result in democratic deficit and the
consequent abuse of power by decisions makers and power-holders.[3]
When
Dato Seri Najib Tun Razak refused to resign as Finance Minister following the
1MDB revelations, he plunged his Government into a legitimacy crisis.
The
1MDB fiasco spawned ludicrous and fallacious arguments to deny the largest
embezzlement by kleptomaniacs in the history of the world occurred in Malaysia.
Steps to keep a lid over disclosure proved inept, so brutal repression is used
to silence those courageous enough to carry out their duties.
Our
Attorney-General is the only 1 out of 6 who holds the opinion there is no case.
It appears the Attorney-General in the other jurisdictions, unlike ours are unable
to discern “donation” from “corruption.” Our Attorney-General twice rebuffed
Swiss requests for mutual legal assistance to investigate the 1MDB corruption
allegations. The refusals add to questions on the adequacy of Malaysian authorities’
response to an affair that is the subject matter of multiple international
queries.
Three
former ministers who spoke about 1MDB during the Budget debate in Parliament are
now under police investigation. Parliamentary privileges and immunities to
enable members of parliament to perform their duties to speak without fear or
favour, not to be unduly influenced, harassed or intimidated by government or
private individuals in Malaysia have been amended. The Federal Court in Mark
Koding v PP [1982] 2 MLJ 120 ruled that a member of parliament’s privileges and
immunities have been validly limited by the amendments to Article 63(4) of the
Federal Constitution. A member of parliament’s privileges and immunities do not
cover offences under the Sedition Act 1948. A member of parliament speaking
about 1MDB in Parliament now runs the danger of being found guilty of uttering
words having a seditious tendency.
Article
107 of the Constitution requires the Auditor-General’s reports to be submitted
to the Yang di-Pertuan Agong and laid before the House of Representatives. The AG’s
reports are open to the public. However, The AG’s Report on 1MDB remains
classified as an official secret under the Official Secrets Act. Pandan MP,
Rafizi Ramli has been convicted for referring to a page in the AG’s Report. He
is sentenced to 36 months imprisonment (18 months imprisonment for each of two
charges to run concurrently). Rafizi will join Anwar Ibrahim in Sungai Buloh.
Unless pardoned, both will be disqualified from being an elected representative
for 5 years. Tian Chua has been sentenced to 3 months imprisonment as are a
host of opposition members, activists, lecturers, students and others who are being
investigated, charged, awaiting trial or convicted for various charges.
Individual Ministerial Responsibility
The Finance
Minister’s loss of legitimacy and credibility is due to his failure to abide by
the constitutional convention known as individual ministerial responsibility. A
fundamental constitutional convention under the Westminster parliamentary
system is that ministers are responsible for the conduct of their ministry.
The principle
of individual ministerial responsibility is central to the parliamentary system
because it ensures the accountability of the government to Parliament and thus,
ultimately to the citizens as a whole. The accountable minister in charge is
expected to take the blame and ultimately resign. This means that if waste,
corruption or any other misbehaviour is found to have occurred within a
ministry, the minister is responsible even if he had no knowledge of the
actions. The principle is essential to guarantee that an elected official is
answerable for every single government action.
Thus
the principle of individual ministerial responsibility requires the Finance
Minister to take responsibility for the 1MDB debacle because it is under his
ministry. Whether he was aware of the wrongdoings or involved personally is
irrelevant. In failing to accept responsibility the Finance Minister lost the
legitimacy and credibility to govern. He can no longer claim he commands the
trust to manage the people’s money.
There
are no merits to the contentions that evidence beyond reasonable doubt he committed
an offence involving 1MDB must be produced before the Finance Minister is to
resign. The office of Finance Minister and Prime Minister is not the dock in a
criminal court. The holder of the office is entrusted to manage the people’s
money, if there is the slightest doubt of his integrity, he must resign. If not
he must be removed. This is to preserve the legitimacy, authority and dignity
of the office.
Failure to be accountable to Parliament
The
Finance Minister failed to honour a second aspect of the Westminster principle
of individual ministerial responsibility. This is the principle that a minister
is accountable to Parliament. Ministers are the link between Parliament and
Government. Public servants carry out the activities of Government through
their work in department and agencies and the Government directs them through ministers
responsible for their activities which include activities by government-owned
companies such as 1MDB. The minister is responsible to Parliament for decisions
made and actions performed by those under his delegation. This means the minister
must make announcements and answer questions in Parliament on the decisions and
performance of their departments.
It is thus
indisputable members of parliament are entitled to question the Finance
Minister on 1MDB. There is not one word that mentions “1MDB” in the 2017 Budget
speech. The only reasonable inference that can be drawn from the Finance
Minister’s deafening silence is that he is unrepentant and has no remorse for the
staggering losses, wrongdoing and irregularities committed by those responsible
for 1MDB under his watch. The lack of accountability is blatantly obvious for
all to see.
Thus
the audacity to ask who is play-acting in the Budget speech: “Sebenarnya disini, siapa yang bermain
sandiwara? Siapa yang tiada substance sebenarnya? Siapa yang menjadi pembelot
dan perkhianat negara sebenarnya? Di mana pula timbulnya rebut ni?” deserves
nothing less than a walk-out in response.
Death of Democratic Governance and
Accountability
It is
no longer possible for the BN MPs to turn a blind to the wrongdoing in 1MDB. Any
denial of wrongdoing is totally not credible in the light of recent revelations
by the international media on the US DOJ suit, actions by the Swiss and
Singapore authorities to withdraw the licences and to file criminal charges
against the banks and officers engaged in the money-laundering of the proceeds
from 1MDB. The first conviction and sentence of imprisonment was delivered last
week.
Continued
survival has been bought by co-optation, propaganda, censorship, repression,
prosecution and imprisonment of opposition leaders, activists, lecturers and
students. The costs for maintaining power includes sackings, transfers, acts of
humiliation and calls to ostracise dissenters and those troubled by their
conscience in the UMNO leadership, past and present, the rank and file and
Government agencies and institutions.
The
117 BN MPs in voting for the 2017 Budget and 11 PAS abstentions in the face of
such legitimacy crisis hammered the final nail into democracy’s coffin in
Malaysia. The government transformation programme from democracy to
authoritarian regime is now completed. When the 2017 Budget was approved democratic
governance, transparency, integrity and accountability in Malaysia died and
were buried.
Off-Budget Debt
The
lack of legitimacy continues as the Government enters into one after another
mega contract, privatisation and concession. One of the biggest concern in the
2017 Budget is not what is in the Budget but what is not there. It is
off-budget funding. Off-budget funding kept outside of government financial
regulations, reporting and audit requirements can give rise to illegal and
irregular transactions. In addition the use of such funds means the reported
level of government expenditure and debt may be understated.
Off-budget
funding may not be contrary to the letter of the law but it violates the spirit
of the law. Omitting off-budget funding in the Budget documents offends the
principle of providing the public a comprehensive, accurate and reliable
account of the public finances. The Budget is a contract of trust between the
Government and the citizens. It is expected that the Budget document should
account comprehensively and correctly for all expenditures and revenues of the
Government and that no figures should be omitted or hidden.
1MDB is
not the only government-owned corporations which outstanding debt can have
significant fiscal implications. This is because these debts are implicitly or
explicitly government-guaranteed, an example is the PKFZ bonds. According to
the 2015 Federal Government Financial Statements the total amount of GLCs’ debt
guaranteed by the Federal Government is RM 920,336,791,310.19 which increased
from RM 850,035,142,802.32 in 2014. This does not include GLCs’ debts or
borrowings for which the Government issued letters of comfort. The 2015
Financial Statement records only the RM 5 billion debt of 1MDB guaranteed by
the Government there is no mention of 1MDB’s liabilities which are more than RM
46 billion.
We are
now in the process of having the most expensive railway in the world. The 688
km East Coast Rail Link (ERCL) project at RM55 billion is another off-budget transaction.
There is indeed cause for concern.
Misplaced Priorities
Why does
the Opposition bother to debate the Budget? BN with its majority will push
through and rubberstamp the 2017 Budget no matter what we say. We soldier on to
discharge our constitutionally-mandated duty. Although in the minority, we like
the BN MPs, are the guardians of public money. The Government cannot spend a
single cent from the Consolidated Fund without Parliament’s approval. By making
a stand, it is a reminder that the national coffers are not someone’s personal
account. The Government is accountable for wastage, corruption and
embezzlement. The Government is required to put on record its justification or
the absence thereof in spending the people’s hard earned money and the nation’s
scarce resources. In doing so, we put public concerns to bear on the
Government’s fiscal and economic policies. It is hoped that by a detailed,
focused and considered debate it would improve public understanding of both the
process and thinking behind the fiscal measures, their impact on the economy
and lives of the people.
Values and Policies
People
think the budget is about rows and rows of numbers on a page, the boring dispassionate
and clinical allocation of funds to the various Ministries and government
programmes. It is more than that. The Budget is in fact a statement of the
values and priorities of the Government represented in the person of the
Finance Minister. The Budget reveals the Finance Minister’s values. It tells us
what he considers are his priorities. The Budget should really be a reflection
not of the Finance Minister’s but the values and priorities of our nation and
its people. The 2017 Budget reveals the Finance Minister is out of sync with
the people. The Budget reveals the Prime Minister’s misplaced values and
priorities.
Ratings more important than People’s suffering
The Finance
Minister has given priority to maintain the ratings by the three international
rating agencies; Fitch, Moody’s and Standard & Poor than the people’s
sufferings arising from the increased cost of living and difficult economic
times.
In the
wake of the 2008 global economic slowdown the Government under Tun Abdullah
Badawi launched the First Economic Stimulus Package of RM 7 Billion. Najib Tun
Razak launched the Second Economic Stimulus Package of RM 60 billion when he
took over as Prime Minister in March 2009.
The
economic situation today is more critical than 2008-2009 with falling commodity
prices, oil prices and currency values of the Ringgit in the midst of a global
economic slowdown. According to the 2017
Economic Report 38,499 were retrenched in 2015 and 20,798 in first eight months
of 2016. The highest retrenchment was in the manufacturing sector (36.9%)
followed by the financial and insurance/takaful (21%) as well as wholesale and
retail trade, repair of motor vehicle and motorcycles. Jobstreet reported there
were 506,000 unemployed persons in February 2016.
There
are critical reasons for providing a fiscal stimulus to boost the economy but
the Finance Minister has instead given priority to reducing the Budget deficit
in order to maintain the credit rating. The Finance Minister in a show of his
statesman-like qualities said he made the difficult decision to reduce the
Budget deficit to 3% and called on the people to brave the increased cost of
living.
The Finance
Minister called on the people to spend moderately by choosing less expensive
nasi kandar restaurants. He has lost sight we are a nation where the
overwhelming majority of our work force has low wages and low income. According
to the Statistics Department 2014 Household Income Survey (HIS) the median
monthly salaries and wages per month for individuals is RM 1,700.00. This means
half of all workers in Malaysia get this much or less. Rising food prices
affect the lower income households the most. The question many Malaysians face each
day is not which nasi kandar restaurant to eat in but whether they get to eat
at all.
The
Khazanah Research Institute reports many Malaysians cannot even afford the
minimum requirements of a nutritious meal. A nutritionally adequate diet is
beyond the reach of many Malaysians. For those living close to the poverty line
it would costs almost their entire income, for those in Sabah and Sarawak it is
more than their entire income.
Between
2011 and 2015, food price inflation was 3.6% on average, whereas overall
inflation was 2.4% over the same period. The increase in the cost of food has a
large effect on the cost of living on households especially those who earn less
than RM 2,000.00 a month. The HIS was carried out pre- GST. Post-GST, no one
except perhaps our Finance Minister, would be surprised to find more shops
shuttered, shopping malls deserted, drastically reduced number of customers in
the morning markets, pasar malam and pasar tani.
The
Finance Minister highlighted the plight of the young nasi lemak seller summoned
for not having a hawker’s licence. He encouraged the young university graduate
selling nasi lemak to continue doing so as part of entrepreneurship. The
Finance Minister failed to realise the young university graduate is compelled
to sell nasi lemak because the Government failed to solve the graduate
unemployment problem. In 2013 graduates constituted 30.6% of the unemployed,
35.2% in 2014 and 33.8% in 2015. The Ministry of Higher Education reported one
out of four in the 254,561 graduates is unemployed 6 months after graduation.
Despite not having solved the problems of mismatch of skills, soft skills, lack
of numeracy, language, critical and innovative thinking the Finance Minister
cut the allocations to 20 out of the 25 local universities.
The Finance
Minister said BR1M is not animal feed, the Government always prioritise the
rakyat’s needs. The amount of BR1M will be increased with an allocation of RM
6.8 billion to be given to 7 million recipients. The fact such a substantial
portion of our population is dependent on BR1M is not something the Government
should be proud of.
The
Finance Minister called on BR1M recipients to become UBER drivers to supplement
their income. He did not realise the many Malaysians have already become part-time
UBER drivers, otherwise 20,000 taxi drivers need not surrender their taxis to
look for alternative livelihood. Many Malaysians have taken a second and some
third job to make ends meet. By saying Malaysians are now enjoying a better
quality of life it reveals how far removed he is from the ground and reality.
Austerity Programmes
Amongst
the criteria considered by the rating agencies is whether the government has a
balanced budget. As a consequence governments proceed to implement programmes
to balance the budget by implementing austerity programmes in depressed
economic times. Austerity programmes in a depressed economy is described by
economist, Joseph Stiglitz as a medicine that sought to cure the disease by
killing the patient.
The
rating agencies do not consider whether the sovereign debt is in a foreign
currency or in the country’s own currency. There is minimal chance of default
by a government of a debt in its own currency. This is because governments are
the only entities able to print their own money.
Paul
Krugman has pointed out the argument that governments running significant budget
deficits should implement austerity programmes during difficult economic times
otherwise they would end up as another Greece is a myth that has been debunked.
It is standard macroeconomics for the Government to provide fiscal stimulus in
a depressed economy. As John Maynard Keynes wrote in 1936: “The boom not the
slump, is the right time for austerity at the Treasury”.
Paul
Krugman produced a chart that showed countries such as UK, US and Japan that
have substantial government debt much higher than Greece that borrowed in their
own currencies performed better than Greece. They did not fall like Greece.
Paul Krugman also showed that the countries that implemented austerity
programmes enjoyed low economic growth while those that did not experienced
better growth. The more severe the austerity programmes the slower the growth.
There are
concerns that providing fiscal stimulus will raise government debt. The 55% GDP
debt ceiling can be raised. Raising debt limits does not directly alter the
amount of debt. It allows the Government to pay for spending programmes that
has been approved. The US Congress has raised the US debt ceiling 90 times this
has not affected its credit rating by the rating agencies.
Budget
surpluses or at least balanced budget have been touted as fiscally responsible,
whereas deficits are painted as unsustainable. In reality there is nothing
inherently responsible in balancing the budget. On the contrary such a move at
a time of high joblessness and underemployment, efforts to reduce rather than
increase the deficit are the height of irresponsibility.
Conclusion
It is
certain the 2017 Budget will be approved. What is not certain is whether
Malaysians can overcome the repression, intimidation, gerrymandering,
malapportionment and electoral fraud that sustain a Government lacking
legitimacy and credibility. See you at Bersih 5.
William
Leong Jee Keen
MP
Selayang
16
November 2016
