(Dewan Rakyat, Monday): DAP commends Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim for announcing the emergency financial package last Friday which was a step in the right direction to restore badly-battered confidence in the past five months, but it is not comprehensive enough to fully restore confidence and it should have been announced as a second budget in Parliament at the end of October when it was clear that the 1998 Budget had failed to restore confidence
I had in fact proposed on October 30 in a speech during the Sungai Bakap by-election in Penang that Anwar present a second 1998 Budget in Parliament on November 5 during his winding-up of the budget debate, as the 1998 Budget presented by Anwar on Oct. 17 had failed to address the fundamental issue of restoring confidence in the Malaysian economy or to check twin currency and stock market crisis, as both the Malaysian stock market and the ringgit have embarked on a sharp decline ever since the budget presentation.
If Anwar had heeded the DAP advice in early November, confidence in the government’s stewardship of the national economy in the face of the economic crisis would not have plummeted to such a depth, with the markets sending the ringgit down to a new low of 3.865 against the US dollar on Friday (5th December) against 3.17 a day before the 1998 budget on Oct. 16, while the KLSE Composite Index had plummeted to the lowest point of 512 as compared to 802.02 just before Anwar stood up in Parliament to present his budget.
Anwar’s emergency financial package on Friday had been better received than his 1998 Budget on Oct. 17, as while both the currency and stock markets reacted negatively to the 1998 budget, Anwar’s 4 p.m. media conference announcement on Friday checked the unprecedented decline of the ringgit to 3.8650 against the US dollar and strengthened it to 3.6950 an hour later.
The Kuala Lumpur Stock Exchange's benchmark index finished with a late rally triggered by Anwar's announcement and closed up 31.51 points, or 5.47 percent, at 607.40, the first time it closed above 600 points since 19th November. Before Anwar announced the measures, the index had been at about 572 points.
Although the markets have given their "thumbs up" with their positive response to Anwar’s emergency financial package, the measures proposed are still not comprehensive enough to fully restore confidence, which is most crucial and critical in any government strategy to put the Malaysian economy back on the track of recovery and revival.
When I called for a second budget on Oct. 30, I had made various proposals to be included in the second budget, such as:
I welcome Anwar's second 1998 budget, although the Malaysian economy and the people would have been saved from the worst of the financial devastation and losses suffered during this period if he had heeded my advice and come out with the emergency financial package five weeks earlier.
In his second 1998 budget, Anwar revised downward the government projection for economic growth next year to 4%-5%, when only seven weeks ago, the projected growth for next year was 7%. The government has decided on a new target for the current accounts deficit, lowering from 4% of the GNP as proposed by the 1998 budget to 3% of GNP.
The government attitude of "growth-at-any-price" is completely unsustainable and the country must focus on sustainable development instead. The question is whether the government would have to further reduce such a growth projection as suggested by some financial analysts and economists if the government is unable to fully restore confidence among investors, both national and international.
To achieve these objectives, Anwar announced a cutback of at least 18% of Federal government expenditure in 1998, beginning with an immediate 10% cutback across the board of both operating and development expenditure and 8% on a more selective basis.
I welcome this cutback as signifying that the government is, for the first time since the five-month economic crisis, becoming more serious in recognising the magnitude of the crisis which had afflicted the country and people.
During the Parliamentary debate on the 1998 Budget on October 20, I had criticised the 1998 Budget for missing the opportunity to send out a clear message to the country on the need for belt-tightening.
I said that although the Government had reduced expenditure in the 1998 Budget by trimming the allocations of ministries and departments by two per cent, the operating expenditure for 1998 of RM45.6 billion would be well above the 1997 Budget allocation of RM42.7 billion, while the development estimates for 1998 of RM18.5 billion would also be above the 1997 Budget allocation of RM17.3 billion. The total 1998 budget of RM64.1 billion would still be much higher than the total 1997 budget at RM59.9 billion.
I said that a very clear message that the government was serious about belt-tightening was to ensure that the 1998 Budget would be at least two per cent less than the 1997 budget, which would have meant a 1998 Federal Budget (operating plus development expenditure) of around RM58 billion.
My proposal that there must be an actual cutback in federal government spending next year as compared to the 1997 Budget except for essential expenditures affecting education and health was ignored at the time.
I therefore welcome the emergency financial package which would aim at a 18 per cent cutback in federal government spending next year, which would mean a cutback of at least RM11.6 billion from the 1998 budget of RM64.1 billion, so that the revised 1998 federal government spending would be in the region of RM52.5 billion - which would make it even lower than the original 1996 budget of RM55.4 billion.
The government however must ensure that the 18 per cent across the board cut in Federal operating and development expenditure does not hurt the poor especially in areas such as health, social welfare and education.
It is the upper echelons of the public service which should be made to bear the burden of the cutbacks in Federal expenditure. I therefore seek a clear-cut assurance from the Finance Minister that the cutbacks would not impose avoidable hardships on the poor and that the government would continue to invest in training and skills acquisition programmes which could bring long-term benefits to the country.
It is important, however, that the second 1998 budget which includes the emergency financial package announced on Friday and other austerity measures, should be properly enacted so as not to raise questions as to their propriety, legality or even constitutionality.
Parliament, for instance, should not be by-passed and MPs, whether government or opposition, should jealously guard the parliamentary prerogative to be the final authority in the land to decide on annual federal government spending.
As the 1998 Budget presented by Anwar to Parliament on Oct. 17 had not been approved by Parliament when the government announced last Friday a RM11.6 billion cutback of at least 18 per cent in the proposed 1998 Federal Government spending, the right and proper course would have been for Anwar to withdraw his original 1998 Budgetary proposals in Parliament and present a second 1998 budget which incorporates the RM11.6 billion cutback and other austerity measures.
There should be the fullest parliamentary debate on the second 1998 budget and at least four full days should be set aside for this purpose. This is why I have suggested an extension of the current meeting of Parliament by at least two weeks , to debate the need for an emergency second set of budgetary proposals to supplement the 1998 budget (as well as the proposed National Economic Action Council) and to allow MPs to do justice to the 13 government bills on the Parliamentary Order Paper awaiting debate and enactment.
I can understand that the emergency nature of the currency crisis last Friday demanded immediate remedial action. The crisis was sparked off by the announcement by the Prime Minister in Langkawi the previous day that Malaysia would proceed with the RM10 billion land bridge project linking northern peninsula and southern Thailand despite the ringgit's depreciation, raising the question as to the government's commitment in September to shelve or delay mega-projects.
As a result, there was another incident in the catalogue of self-inflicted haemorrhage of confidence on a day when Asian currencies rallied against the US dollar in reaction to the news that South Korea had finally secured agreement on a US$57 billion IMF-backed assistance package, except for the Malaysian ringgit. The ringgit went into a free-fall, touching an all time-low of 3.7300 on Thursday and 3.8650 at 4 p.m. on Friday, until the self-inflicted haemorrhage of confidence was stanched by Anwar with his announcement of the emergency financial package. Otherwise, the ringgit would have continued in its free fall and nobody would have been surprised if it should fall below US$1-RM4.00 level last Friday itself.
Of course, if Anwar had announced some of the measures of the emergency financial package very much earlier when the 1998 Budget had failed to restore confidence, then the ringgit's free-fall last Friday would not have occurred. We must admit that the financial disaster last Thursday and Friday was not inevitable, but preventable and avoidable.
Anwar’s media conference last Friday announcing the emergency financial package was the first time in the past five months that the government had admitted that the country was facing an economic crisis and that the people would suffer a lot of pain before the economic crisis could be resolved.
Only last month, local editors were directed not to use the word "crisis" in the local mass media so as not to alarm Malaysians.
I hope the government has ended the "denial factor" phase of the economic crisis and is ready to take Malaysians into its confidence that there is a full-blown economic crisis, with the Malaysian economy likely to get worse before it gets better
Malaysians will remember that when Anwar presented the 1998 Budget in Parliament on October 17, Barisan Nasional leaders like the MCA President Datuk Seri Dr. Ling Liong Sik and the Gerakan President, Datuk Seri Dr. Lim Keng Yaik competed with each other as to who could give the most superlative praise for Anwar’s budget as the "painless way to overcome current economic problems" and to boost confidence. Datuk Ling described it as "another good and caring budget".
In actual fact, the 1998 budget was a failure as it failed in its paramount task of restoring confidence in the economy. Immediately after the budget presentation, both the stock market and the ringgit continued in their downward slide, with the KLSE Composite Index falling from some 800 points to a low of 512 and the Malaysian ringgit falling from 2.72 to 3.8650 against the US dollar.
It is time that the government be open, frank and honest with Malaysians, tell the people that the country is in the thick of a grave economic crisis and that there is no way Malaysia can come out of the crisis without suffering a lot of pain, hardships and sacrifices.
When Dr. Tan Seng Giaw and I met the Prime Minister, Datuk Seri Dr. Mahathir Mohamad in Langkawi on Saturday and exchanged views on the national economic crisis, we stressed that any austerity drive must not only be evenly spread among all Malaysians, regardless of rank or status, government leaders must be seen to be setting the example in belt-tightening. The government, however, has still to convey its seriousness that it is everyone who must be involved in the austerity campaign and not just the public at large.
This is why incidents like the RM6.3 million renovation in Selangor, RM5 million renovation for the Selangor Mentri Besar’s residence and RM1.3 million for the Mentri Besar's office, on the one hand, and the decision of the Tampin District Council to plunge the area into darkness by cutting off electricity supply for four hours every day from 1 a.m. to 5 a.m. to save RM80,000 electricity bill a month, regardless of safety and security of the residents or law and order in the district, had sent very wrong signals nation-wide!
The Federal Government must communicate to both the Selangor and Negri Sembilan State Governments its extreme disapproval of such lopsided examples of austerity - and although the decision on the RM6.3 million renovation for the Selangor Mentri Besar's residence and office were decided before the economic crisis, it was such wasteful extravagance which were among the factors contributing to the present national crisis.
With the economic crisis, starting with the twin currency and stock market crisis, and worries that it would spread to the property and banking sectors, the government should have prepared the people to expect the Malaysian economy to get worse before it can get better.
Since the start of the economic crisis, the value of the Malaysian stock market has fallen by 55 per cent while the Malaysian ringgit has depreciated by more than 50 per cent when the Malaysian currency reached its all-time low of 3.8650 to a US dollar on Friday.
This means that RM100,000 in the stock market before the economic crisis would now be worth only RM45,000, and if this sum has to be converted into foreign currency, whether US dollar or British pound, it would be worth only RM22,500 as compared to its value before the economic crisis!
Before the economic crisis, a Malaysian parent can support two children studying overseas with RM100,000 a month. But now, this sum if invested in the stock market, hit by both the stock market and ringgit crisis, cannot even support one person studying overseas for half a month as it has shrivelled to 22.5 % of its previous value and would be worth only RM22,500 when converted into US dollar or British pound. This illustrates the gravity of the financial crisis faced by all Malaysians with children studying overseas!
This, however, is not the only adverse consequence of the national economic crisis. After the Gongxi Raya next month, the prices of essential commodities would increase, with reported 35% increase for sugar and 40% increase for flour, threatening a new inflationary spiral in the country - which will bring great hardships to the poor and the fixed-income groups, like pensioners.
During the parliamentary debate on the 1998 budget, the government and Barisan Nasional backenchers put up a false front, refusing to acknowledge that the country was facing a grave economic crisis, which had been aggravated by many self-inflicted wounds of the government, whether of commission or omission. The whole gravity of the national economic crisis was further trivialised when Parliament was transformed into a 10-minute Parliament, with MPs limited to 10 minutes each during the Budget debate on the various Ministry allocations.
I will give one example to illustrate the government's "denial syndrome" which led it to Parliament being used to downplay the gravity of the economic crisis. The Prime Minister has gone all over the world to make use of every available international forum to highlight the iniquities of currency manipulators, pointing out that US$30 billion (RM108 billion) had been "stolen" from Malaysians as a result of the currency crisis.
In Parliament however, government leaders take a different line. Last week, for instance, during the debate on the Foreign Ministry allocations for the 1998 budget, when the DAP MP for Kepong, Dr. Tan Seng Giaw, referred to the US$30 billion (RM108 billion) loss suffered by Malaysians as a result of the currency crisis, the Deputy Finance Minister, Datuk Dr. Affifuddin Omar interjected to say that this was "mere paper loss".
The contradictory versions by government leaders about the US$30 billion (RM108 billion) losses suffered by Malaysians as a result of the currency crisis, raising the question as to whether it is a genuine or a mere paper loss, shows that the government has still to grasp with the problem of tackling the perceptions related to investor confidence in Malaysia and that unlike other countries like Thailand, Indonesia and South Korea, Malaysia is not yet prepared to end all brave talk and to "bite the bullet" to adopt painful financial and macroeconomic adjustments and reforms so that Malaysia can be put on track towards economic recovery and revival.
Parliament must make amends. Let all MPs, whether government or opposition, face up to the stark reality that Malaysians and the real economy are going to suffer great pain, hardships and even suffering in the coming months.
The question is how long the economic crisis is going to last – two, three or more years, and what has to be done by the government and the people to ensure that the economic crisis is the shortest possible, that latest by the year 2,000, Malaysia would be in full economic revival.
The government must realise that finally it is the people’s unity and commitment which can turn the economic crisis around – and this is why the government must be prepared to listen to the views, concerns, hopes and fears of the people as expressed through their MPs in Parliament.
Ministers must end the "denial syndrome" and stop pinning all the blames for our national economic crisis on external factors, refusing to acknowledge the series of avoidable self-inflicted wounds, whether the 100 "designated securities", the establishment of a RM60 billion fund to prop up the stock market, the threat of the use of the Internal Security Act against financial analysts and journalists writing unfavourable reports about the Malaysian economy, arbitrary interpretation of trading rules by the FIC, intemperate outbursts by the Prime Minister in international forums although knowing they would have the effect of causing a collapse of the currency and the stock market, the UEM-Renong deal and the take-over of Bakun dam project by the government, the latest being RM10 billion land bridge project announcement.
Government Ministers should also stop claiming that there were nothing wrong with government policies, claiming that the same policies had made the country's economy robust with strong fundamentals.
We do not seem to want to learn from the lessons of other countries, like South Korea where the same policies which had enabled it to achieve a meteoric rise from a war-torn nation to the world's 11th largest economic powerhouse, with a gross domestic product larger than Thailand, Indonesia and Malaysia combined, earning South Korean admission into the exclusive ranks of the world's rich nations' club, the Organisation of Economic Co-operation and Development (OECD) last December, has transformed the Asian Tiger into an Asian beggar with a unprecedented US$57 billion IMF bail-out.
We cannot just blame George Soros for every deterioration of our economic crisis, whether it be the bloodbath in the Kuala Lumpur stock exchange after the UEM-Renong deal which proved to be a national catastrophe or the free fall of the Malaysian ringgit after Mahathir's land-bridge announcement.
While Malaysia should continue to press in world forums for international rules to regulate the global currency markets, our topmost agenda must be to stop the downward slide of the ringgit and the stock market and to get the national economic recovery seriously back on track.
The single greatest challenge today is for Malaysia to end the five-month long non-stop haemorrhage of confidence, embark on a programme of restoring confidence through financial, economic and political reforms by uniting Malaysians to take some of the IMF bitter medicine without having to seek IMF bail-out such as crack down on corruption and cronyism, government and corporate transparency.
I told Mahathir during our meeting in Langkawi on Saturday that one of the reasons why the government has not been able to restore confidence is the problem of information deficit. The tragedy about the information deficit in Malaysia is that Malaysians now depend on foreign mass media for news, analysis and information on the Malaysian economic crisis, with the local media treated with great skepticism - although some foreign mass media often contain misleading reports.
The Government should stop treating Malaysians as if they are children who could not handle bad news. Malaysians should be trusted as capable of handling such bad news and to exercise judgement as to what to believe. The authorities should realise that there is nothing worse than manipulating or suppressing such "bad news", which is not only impossible in this era of Information Technology, but would give such "bad news" even greater currency, credibility and weight - which would be completely counter-productive to the paramount objective of restoring confidence during the economic crisis.
In fact, the government, if it is sincere and serious about wanting Malaysia to be in the forefront of information revolution, should start dismantling the restraints on press freedom to allow for the emergence of a more democratic polity.
The DAP supports the government's stand not to seek IMF help as an IMF bail-out would tantamout to Malaysia surrendering her national sovereignty as well as having to accept terms which would be very harsh and unacceptable in disregarding social justice for the people. However, Malaysia must be able to prescribe and take some of the bitter medicine IMF would have prescribed such as financial and economic reforms as well as greater government and corporate transparency and an all-out war against corruption - in other words, IMF bitter medicine without IMF.
It has rightly been said that in nearly every economic crisis, the cause is political, not economic. The most important question, therefore, is whether the government has the political will to carry out financial, economic and political reforms to overcome the economic crisis.
Anwar announced last Friday that there would be no bail-out of troubled companies. Although the stock market rebounded strongly this morning, registering a 87.7 point jump in the KLSE CI, closing at 695.10 at the close of this morning's trading, and which ended the day’s trading with an increase of 69.07 points concluding at 676.47, whether this rally could be sustained would depend on whether the government is prepared to fully "bite the bullet" and to take all the "bitter medicine" to restore the economic health of the nation.
For instance, Malaysians would like to know whether there would be any bail-out of the 27-year-old "economic wonder-boy" who, without any corporate background or experience, could embark on a RM1.2 billion corporate acquisitions depending on the support of his "uncles".
To convince Malaysians that the government is now prepared to abandon the "denial syndrome" and to bite the bullet, it should announce a comprehensive package of measures, including:
During our meeting in Langkawi, Mahathir told Seng Giaw and me that the government has no intention to have Opposition parties represented in the NEAC, which would be chaired by him, with Anwar as deputy chairman, and membership comprising the economic ministers and representatives from various sectors of society.
As I understand it, the NEAC would be a hybrid Council, having the executive powers of the Cabinet though it would have to report periodically to Cabinet on measures to address the national economic crisis. Cabinet Ministers have clearly fallen down on their responsibility as national stewards, to the extent that another body has to be appointed to share and even supersede Cabinet responsibilities. The time has clearly come for a major Cabinet reshuffle, for the infusion of new blood into a Cabinet, and the replacement of several Ministers who seem to be quite lost in a fast-changing world brought about by information technology and globalisation.
Finally, whatever the final powers and structure of the NEAC, this council must be answerable to Parliament, and a mechanism must be established to formalise such a relationship of accountability to Parliament by the NEAC.