Subsidies, gambling and the budget

We Malaysians are an extremely lucky group. Our living expenses are subsidised heavily by the generous Goverment ( of course with the taxes collected ). This amount is by no means small. It reaches a peak of more then 35 billion Ringgit in 2008 and about 18.6 billion ringgit last year.

The goverment said it cannot continue to be that generous; unfortunately for us it is true. It is having problems balancing the budget. Even during the many years of positive economic growth the budget was in deficit; ironically it is claimed to be a norm for many nations. The goverment has to borrow money to spend and to repay or prepay the interests and debts. The revenue is barely enough to pay for the operating expenditure today ( graph below ); and will be insufficient in the not too distant future. Clearly there is just not enough for development or capital investment. Over the last decade it has borrow money locally from the EPF, banks, and you; payment is simple -keep the interest low and continue to print money. External borrowings are not cheap and the hungry wolves are not easy to pacify when threatened with default. Remember the bitter lesson of the infamous 'Tomyam crisis' of the 1998?

We were growing spectacularly before, we were deluded to think we could continue to; unfortunately growth today is stunted. Some said we are staring at a failed economy, a minister even claimed the impending possibility of catching the Sovereign crisis -'PIGS' disease made famous in Europe recently. With limited financing, it was very creative then, and still is to expedite implementation of projects with a rent based system. How else can we generate enough excessive electricity after 1992 without the presence of the Independent Power Poducers -IPP's and have good but expensive tolled roads without PLUS. Never mind the cost, the Malaysian people can stomach it; we are known to have frequent attacks of amnesia.

The Malaysian goverment employs more than a million Malaysians. It will have to continue, it need to employ those unemployeable (undesirable outcome of the local Education system) or who cannot find one in the private sector. Its funding needs for salaries, services, supplies and pensions will continue to grow and grow faster than the gross domestic product (GDP) as is the case for the last decade. This poor productivity is certainly not tenable. Overstaffing and underworked personnel is a big negative in work ethics. Leakages are of course common as seen in most third world countries. The Auditor-general has been working overtime; unfortunately the malaise and inefficiency in procurement of services and goods will continue tomorrow as it was before and is today.

The Kertih and other oilfields are fast running dry, unfortunately with increasing demand for oil; we will soon become a net importer pretty soon, sooner than expected. This will impact revenues from oil. Personal income tax is growing too slow and will be too low to compensate for the subsidies. Gaming tax is a sure way and it will be foolish not to let them gamblers have their fun. NFO, pools and casinos are good, and now with sports betting it is complete.

Now for the soon to be consumption tax.....

Joy.....We will soon live in a world with a real cost of living...

Lets continue to gamble, waste and splurge.

Its easier and more fun.

There is no place to hide, the sarong has been lifted.