Lee Wee Tak
Why does a high income nation needs higher borrowing? Shouldn’t a high income country aim to be more self-sufficient, reduce borrowings and strive to become a net creditor (i.e. lender to others)?
PART I : ORTHODOX NATIONAL DEBTS
A quick look at the Ministry of Finance (MoF) annual statistics shows the following:
· From 2007 to 2011, the GDP increased on average, 6.4% a year and between the years, our GDP increased by 28.2%
· During the same time, external borrowings increased on average 8.2% a year and between the years, our external debts increased by 37.2%
· During the same time, Hutang Dalam Negeri Persekutuan increased on average 15.2% a year and between the years, our HDNP increased by 77.22%!
In short, as much as Najib praised Malaysians for being hardworking; his administration works much harder at incurring debts. Tell me who should be bersyukur?
The last 2 quarterly reports for 2011 from MoF repeat the same thing – high portion of operating expenses: 79.5% for Q3 2011 and 74.1% for Q4 2011. (this high ratio means opex eating away development expenditure for the nation)
Opex comprise chiefly of
· fuel subsidy (result of Mahathir’s Proton first policy, exposing Malaysians to uncontrollable oil price trend, tormenting traffic jam and substandard public transport system) and;
· civil servants remuneration where an overstuffed civil service keep getting increment and bonuses without corresponding improvement in performance, testament of the success rate of BN’s 50 years old education system in producing a viable work force.
Ministry of Finance quarterly report, Q3 2011:-
Ministry of Finance quarterly report for Q4 2011:-
And moving into 2012, the formidable subsidy and payments to civil servants kept the tax payers’ burden high. Although termed nicely as aid to the people, the RM500 aid, the school vouchers and book vouchers are just actually more debts pile on the rakyat, ostensibly to create “feel good” before Najib unveils his trade secret – the exact GE date. Technically, does this constitute vote buying?
MoF's quarterly report for Q1 2012:-
It is nothing unusual about dishing out money recklessly in a GE year. It is a trade mark financial disease and ill discipline.
In every GE year existing expenditure ceiling is smashed; the normal expenditure level is kept at a new summitt and keep increasing, pushing national debts ever higher (see MoF graph below).
The last number in the above analysis, 11.9%, basically means from 2003 till 2011, total operating expenses increase 11.9% on average basis. Yet in election years of 2004 and 2008, opex increased tremendously by 21.4% and 24.7% against their preceding years. This means concentration of sweeteners.
In 2011, financial indiscipline is measured by a 22.3% increase against an already high opex level in 2010. Trust the numbers in 2012 will make even greater sickening reading.
PART II: LESS APPARENT KIND OF NATIONAL DEBTS
Part I only talk about the “official” debts. In Malaysia, a host of public services and goods are provided by GLCs but called "private sector" - like Telekom, Tenaga, Padi Beras Nasional, MyEG etc.
Since their debts are paid by the public, it is also considered national debt. I previously blogged about the concept and numbers here:
Back in 2010, Najib administration promised the following the pile more and more debts on the rakyat:
According to Singapore's Today, Dow Jones reported that 21 more government bonds auctions (really it means rakyat debts committed by temporary administrators on their behalf without getting rakyat's consent), 1/3 more than this year, to raise money to spend on 131 "key projects" (which should include the much objected Menara Warisan Merdeka).
In other words, the Najib administration promised Malaysia will borrow more and have to pay more. Now why does a high income nation needs higher borrowing? Shouldn’t a high income country aim to be more self-sufficient, reduce borrowings and strive to become a net creditor (i.e. lender to others)?
This is a janji that is not only delivered, but surpassed my imagination.