Thank you Mr. Chairman,

Praise to almighty God that we are able to gather here tonight for this Budget Forum 2010. I thank all distinguished panelists and all who are present here tonight.

Ladies and gentlemen,

As all of us are aware, Prime Minister Datuk Seri Mohd Najib Razak announced Malaysia’s 2010 Budget in Parliament last week. This was an important budget, being Datuk Seri Najib’s first as Prime Minister of Malaysia since taking over the reins eight months ago. The contents of the budget would help us to understand the goal, theme and his strategy in managing Malaysia’s economy over the next year.

It seems that the budget has been well-received by some quarters, and has been lauded as a rakyat-friendly budget due to the various ‘goodies’ given. For example, there are allocations for companies involved in green technology, students, community colleges and the urban poor, amongst others.

I will not go into the details of the benefits bound to be received by the various sectors in the 2010 budget here. On the contrary, I would like to highlight the deficiencies or limitations of the national budget that was just announced. What I want to address is this : “Reading between the lines of the national budget.”

I would like to highlight the danger signs that could well compromise our nation’s future. In this matter, we have to train ourselves to look beyond the superficial. On the contrary, we need to move beyond our worries that colour our perception towards the 2010 budget. According to the Open Budget Index 2009, Malaysia was given a score of 35% based on an evaluation of budget transparency and openness.

These findings are from an international study and Malaysia fell into the ‘poor’ category that said, “there was little or scarce information available to the public”, meaning that the budget document itself does not provide us sufficient information, what more not sufficient disseminated to the public.

When we read the 2010 budget book, we find that there is a lack of economic direction given the current national economic conditions. Phrases like “high-income economy”, “transforming from agriculture to industrial-based economy”, and “shifting to a new economic model based on innovation, creativity and high-value added activities” are actually weak attempts and lacking in substance. These phrases are just repetitions of what we have seen before the presentation of the 2010 budget.

Truth be told, our country is in dire need of transformation; major institutional failures have caused us to lose huge economic investment and tensions in our relationships with other neighbouring nations. Investors now favour Singapore, Thailand, Vietnam and Indonesia to Malaysia. We are in dire need of transforming the nation today; where key structural and institutional failures have caused us to lose out on greater investment and economic vigour relative to our neighbours. Investors say Singapore, Thailand, Vietnam and Indonesia are overtaking Malaysia in popularity.

If we truly want to transform Malaysia’s economy, a targeted and holistic economic plan should have been outlined. It involves stimulating economic growth, improving transparency in the market and administration and also job creation. In addition to that, clear goals must be set in order to reduce the budget deficit, reverse failed privatization, stimulate trade, dealing with healthcare and immigration issues.

However, where can we find these crucial elements in the 2010 budget? In actual fact there are huge gaps and limitations that have to be addressed and cleared up within this 2010 budget.

The 2010 budget is a reduced budget from RM215 billion in 2009 to RM191 billion in 2010. This drop is directly related to the Government’s reduced revenue of almost RM20 billion. The Government’s whopping levels of operating expenditure has been criticised in the last 4 years. Only this year has it been reduced by 13%, although it is unclear whether the civil servants’ bonuses will be announced at a later point this year or next. The amount of spending in the Federal 2009 budget was twice the size of the 2003 budget. This was an average increase of 8%, more than the population increase of Malaysia during the same period of time.

Ladies and gentlemen,

The fact that revenues are falling sends a signal that all is not well or healthy with the state of the federal government’s coffers. Now, every credit card holder is being charged RM50 even though the card was given without any charge in the first place. Datuk Seri Najib said that the study about the impact of a goods and services tax (GST) is in its final stage and the federal government is going to spend RM22 million for this study. This country needs to explore alternative revenue streams aside from petrol and gas as Malaysia will be a net-oil importer very soon.

We need to give serious attention to the announcement that the government is going to start a second wave of privatisation. Although it starts out with a good premise of reducing the size of government, we have to understand that privatisation in Malaysia is done in a flawed manner. Here, for example, whenever government agencies have been privatised in the past they end up riddled with debts, eventually forcing the government to pay off their debts (bail-outs), the amount of which reaches up to a few hundred million ringgit.

This time, companies will be privatised under the Ministry of Finance Inc. and other viable government agencies. Apparently this is to “reduce their financial dependence on Government”, but if they fall under the purview of the MOF it is highly unlikely they will be entirely independent from the government. Instead of stimulating small and medium enterprises, which is the correct direction of an innovative and entrepreneurial Malaysia, we are saying: Take a government department, “privatise it under the MOF with government funds and investment”, and give these companies preferences whenever we want something “outsourced”.

Malaysians have already suffered the bitter lessons of crony-privatisation in which selected cronies and individuals have benefited. Taxpayer money is used to enrich these selected individuals. Therefore, citizens of this country must be vigilant in finding out which agencies are being privatized; ensuring that its profits is enjoyed by all, and that the government would not be burdened should the privatized companies fail in the future. Therefore, citizens of this country must be vigilant in finding out which agencies are being privatised, which individuals are benefiting, who they are and what profits they will receive as a result.

Ladies and gentlemen,

Another issue I want to address is “Off-Budget Items”. For example, the Defence Ministry’s budget is left out of all budget documents given the reason that the information could compromise national security. For the year 2008, RM8.2 billion was spent by the Ministry of Defence where 54% were through “direct negotiations”, compared with that in 2006 where only 31% was carried out through “direct negotiations”. This means that the number of open tenders has decreased since the year 2006. Every one of those documents needs to be published as proof to the people that the government is being responsible and prudent in spending. We have already seen several controversial cases and shadowy transactions taking place, and Malaysia cannot afford to lose so much money to a few corrupt politicians.

Another example of an Off-Budget item is the increasing use of private sector consultants to achieve the government’s objective. For instance, I am told, that the whole KPI project (which Datuk Seri Najib so passionate drives) is now being farmed out to consultancy firms outside the government. Does this mean that all government projects, including the NKRA(National Key Result Areas) must be carried out by consultants that are paid a huge sum although the same job could be done by the civil service?

We already have a bloated civil service of 1.24 million people- the highest proportion of civil servants-citizenry in the region, and yet we continue to employ the services of consultants that cost a huge sum of money. Actually, this is the best time to reevaluate the operational expenditure, and examine whether employment of the public sector has already reached and exceeded its maximum limit. Although it is good that bodies like PEMUDAH are formed, a temporary time period must be ensured, and subsequently these functions should be absorbed into existing civil service.

The number of civil servants increased 26% from 2003 to 2008. In actual fact, it is not sustainable for the government to keep expanding the civil service as firstly, this action is inefficient for national productivity: secondly, top-heavy bureaucracy is supported by the taxpayer and thirdly, it creates a burden as some of the civil servants are not needed. It has become the employer of last resort.

On the subject of inefficiency within Government, I would like to ask this question: How many institutions and establishments are needed to formulate the national economic policy? Right now, the federal government has established the NEAC (National Economic Action Council) – originally formed to address the 1997-98 Asian Financial Crisis; the EPU (Economic Planning Unit) under the PM’s Office; the ICU (Implementation and Coordinating Unit) under the PM’s Office; PEMUDAH, and now a new PEMANDU is being set up. So, is this the version of economic efficiency that Datuk Seri Najib is referring to in the 2010 budget?

As far as I can see, the federal government is spending too much time on numerous meetings and empty talk within all the bureaucratic layers. Many of these institutions fall directly under the jurisdiction of the Prime Minister’s Office, which boasts a budget of RM12 billion for 2010. This amount is almost 12 times the budget of the entire state of Selangor, which is the next area I will touch on.

There are a whole host of provisions within the budget for items that would rightfully be channeled to benefit the States across the country. However, due to the nature of our political divide between Federal and State, we are never certain whether or not these funds will be channeled directly or into the accounts of certain people..

Although we are officially a Federalism, where states are given some level of independence, we have undergone greater centralisation of government over the years, leaving states with little jurisdiction; and this situation is exacerbated under a Pakatan Rakyat ruled state. For example, the RM2.6 billion announced for water supply and sewerage services – how will this benefit Selangor’s water industry which is currently being restructured?

The RM281 million for state economic development corporations – which states do they refer to, and shouldn’t meetings be held with the State government in order to determine the workings out of this? My hope is that there will be meetings between state representatives and respective ministries in charge of disbursal of funds, so that we are able to connect the funds from the top to the beneficiaries at the bottom.

In other federalist countries, there is a better arrangement made between the federal and state governments, even when they don’t belong to the same political party. Take for example, Canada and Australia. They are known to behave professionally to ensure cordial relations and that proper financing is distributed despite their political differences.

These countries use the concept of equality, an equalisation formula, where federal government makes equalisation payments to states to allow them to provide their residents with public services that are reasonably comparable to those in other states; at reasonably comparable levels of taxation. The old maxim of “no taxation without representation” rings true here.

State government would then receive these unconditional funds and use them to help pay for programmes, such as social programmes, education and environmental issues which would serve the public. This acts as a guarantee that a basic level of social and economic welfare is taken care of and available to all residents of states regardless of the local fiscal conditions within the state they reside in. Unfortunately, this does not happen in Malaysia, where Pakatan-led states are not given direct development funds from the federal government.

Now these funds are redirected to the Federal-government State Development Office (SDO) which was physically relocated out of our own state building. The Selangor state government does not officially know anything about its own SDO office, as it is a federally-run body. It is time we put away with these political games and realise that common development is necessary for the overall development of the nation for the sake of the welfare of the people

In order to truly be a 1Malaysia nation, political considerations that are filled with corruption and vengeance must be put aside, especially by the ruling federal government.

According to the Global Competitiveness Report, Malaysia has fallen in two of the global economic rankings, namely from 21^st to 24^th in the World Economic Forum (WEF)’s and from 21^st to 23^rd in the World Bank’s Doing Business 2010: Reforming Through Difficult Times, between 2009 and 2010. Although some may dispute ranking systems, saying that we are competing with all other countries, meaning Malaysia itself may not have deteriorated. However, the point about global competition is that Malaysia is not improving itself fast enough, compared to our neighbours around the world.

One of the ways the government has responded is to increase the level of funding for the Royal Malaysian Police to RM1 billion in 2010, because investors are worried about safety and security in this country. Although this is a good move to step up the fight against crime, my concern is that the bulk of this money is going to RELA, which is a volunteer organisation known for its harsh tactics against undocumented migrants. Every member of RELA, after receiving training for all of two weeks, will have the right to bear firearms to “fight crime” on the streets, something we must be very cautious of.

This glaring fact, accompanied by the annual AG’s report that names and shames institutions, should send a signal that the entire country is in need of reform. Our institutions are not professionally independent, our corruption culture has crept into the business sphere leading to a strong politics-business linkage that is so difficult to break.

Rural investment in the budget is not very clear in terms of its growth targets. Of course, this is difficult when the national budget places such a strong emphasis on subsidies and incentives, which actually mean handouts. As a “handout”, or as the term goes, “helicopter money”, there is no way for the government to calculate its incremental output ratio. Subsidies are necessary for a period of time but they also create inefficiencies in the market. Therefore, we need to think wisely on how to deal with this issue of subsidies.

There is also an unequal distribution in the 2010 budget, for instance, between Sabah and Sarawak. Growth inequality between these two states is very stark, where there are villages in Sabah and Sarawak that until today still do not have electricity or clean living conditions. All we hear on Sabah and Sarawak in the budget are allocations for schools, private infrastructure projects and welfare benefits. Nationally, our gini coefficient that measures income inequality of society, is one of the highest in the region.

The budget hasn’t sufficiently addressed this. It has changed the poverty line income for the urban poor to RM3000, which on one hand is a good sign, to give a clear indication that are more needs to be done to help them; on the other hand Federal government shouldn’t be expected to merely provide benefits without evaluating the effects of those initiatives designed to help them; are these interventions effective and what are their impact?

The concept of 1Malaysia as a uniting slogan in itself may be well and good, but I again observe the hypocrisies that it continues to support. The Biro Tatanegara, for example, should be abolished by Datuk Seri Najib’s administration in this budget. The BTN is a waterhole for racism and discrimination, social slurs targeted at the non-Malays in a very blatant manner. The fact that all civil servants have to undergo this training before starting their employment in the government sends a complete opposite signal of what 1Malaysia seeks to achieve. To support a uniting agenda, much more needs to be done.

Ladies and gentlemen,

For Malaysia to truly progress relative to its neighbouring countries, an overhaul of the ways in which our government operates is needed. Pakatan fundamentally believes in an economic policy that is just and fair, ensuring those from all races be given equal opportunity based on meritocracy and need. This does not mean the Malays will lose out in any way. Whenever Selangor state government has a programme targeted at the poor, it goes without saying that the Malays would be the biggest beneficiaries.

The current Datuk Seri Najib budget failed in its bid to provide fresh and bold ideas to truly stimulate the economy. It also failed to address the large looming elephants in the room; those involved in corruption, no transparency in government, and lack of accountability.

“Following the trail” of the budget money – at federal, state and local councill level – is a necessary skill set that allows us to evaluate if we are getting our (meaning tax payers) best returns on the taxes we pay to the government.

Yang Berhormat, Dato’-Dato’, ladies and gentlemen,

While the 2010 Budget does have positive perks for selected sectors of the economy, there are problems in Malaysia that are larger and deeper than what these perks can correct. The time has come for a massive overhaul in the way we manage our resources. This means that the budget has to be more open and transparent; there should be no more off-budget or contingent liabilities not recorded for the public.

In addition to that, the issue of inefficiencies and budget deficits has to be better managed. Issues of public concern such as security and public transport must be better addressed, inequality must be addressed especially in Sabah and Sarawak.

Finally, I hope that real growth mechanisms must be more carefully outlined.

With this I end my speech. In the name of Allah, the beneficent, the merciful, I hereby officiate the Budget Forum 2010.

Wabillahitaufik walhidayah wassalamualaikum warahmatullahi wabarakatuh.