There had been intense speculation since August on the dissolution of Parliament and the holding of the 10th general election firstly on a month-to-month basis and now on a week-to-week basis.
From the speculation that Parliament would be dissolved before the convening of Parliament on Oct. 18 to before the presentation of the 2,000 budget on Oct. 29, the forecast has shifted to November after the budget presentation next Friday, with almost every weekend in November cited as a possible date for dissolution or polling.
I had never believed that a budget is important for any election, as all the "goodies" promised in a budget could be made in the election manifesto of the ruling coalition or in the speeches of the Barisan Nasional leaders.
The delay in dissolution of Parliament is not because of waiting for the 2,000 budget presentation, but because Datuk Seri Dr. Mahathir Mohamad is still unsure of electoral support especially in the Malay heartland, despite the bravado front put up by UMNO leaders that they had laid the "Anwar ghost" to rest.
Mahathir has no confidence of winning the next general election with two-thirds parliamentary majority or the 10th general election would have been over by now and there would have been no need for Mahathir to start on his second round of pre-election national tour of the states.
The Barisan Nasional government had long started to give out "goodies" to the voters and this was why in early June, the First Finance Minister, Tun Daim Zainuddin, announced a RM600 special payment to the 800,000 civil servants to be paid in monthly instalments between the months of July and December, the reinstatement of the civil service allowance and fixed allowance for senior government servants and police officers since August and the recent promise that the government would consider several CUEPACS proposals including an annual bonus.
It is because of the impending general election and the challenge posed by the Barisan Alternative that the government backed down from its plan to corporatise and privatise general hospitals as well as the scrapping of the forced bank merger plan to reduce the 58 financial institutions into six banking groups.
The 2000 Budget to be presented in Parliament next Friday will be an election budget designed to win the election for Barisan Nasional rather than to set the economy on the right course of sustainable economic recovery and growth.
Economic analysts have already forecast that the government would announce tax cuts and even a phase-out of capital controls when it unveils an election-eve budget next Friday.
The Malaysian Institute of Economic Research (MIER) recently forecast that the 2000 budget deficit was likely to be at least five percent of gross national product (GNP) and could include a cut in individual income tax rates as an election ploy.
MIER has revised its economic growth forecast for 1999 to 3.6 percent from 1.8 percent, but this will mostly because of government spending as private sector investment and consumption are not really growing.
Malaysia's budget deficit is projected to rise to 6.1 percent of GNP in 1999 from 3.7 percent last year, and for the next several years, the Barisan Nasional government will be operating with budget deficits, increasingly dependent on borrowings both domestic and foreign.
As the earlier speaker Dr. P. Subramaniam said just now, there is nothing wrong in deficit budgets and government pump-priming the economy provided they are spent on projects which could contribute to robust and sustainable long-term economic growth, such as education, health, housing and social infrastructures.
But this is not the case as the sharp jump in government expenditures are not on essentials but on mega-projects and bail-outs of cronies and other wasteful projects.
Another speaker, Sdr. Fan Yew Teng referred to the book by the second Finance Minister, Datuk Mustapha Mohamad entitled "Malaysian Economy - Myth and Reality". This was also the title of an article in the recent issue of the Far Eastern Economic Review, cover-dated October 21, 1999 which has angered the Malaysian authorities.
In his article, "Myth vs. Reality in Malaysia", Michael Hamlin warned of the dangers of the Malaysian government believing its argument that capital controls saved the country from the severe social and financial upheaval that its neighbours experienced.
Hamlin wrote:
"Benign acceptance of the notion that capital controls may be all right after all is nestled in the too-easy assumption that what was wrong with Malaysia - and indeed Asia - has been fixed. It hasn't."
Hamlin said capital controls had almost no impact either in benefiting or damaging Malaysia's economy because they were imposed when they no longer mattered. He continued:
"By mid-1998, Asia had fallen as far as it was going to economically. The task was no longer breaking the fall, but managing recovery.
"That was in fact Mahathir's dilemma, and the point where he and his former protege, Anwar Ibrahim, finally and irrevocably parted ways. Real recovery - of the sort that would safeguard the economy from similar future shocks - would require the fundamental remaking of Malaysia's corporate and financial sectors. And for Mahathir, the price politically was just too great.
"What this means is that capital controls were less a financial strategy to save Malaysia's economy than they were a political ploy to preserve it. Indeed, despite the much-hyped banking reform we see now, Malaysia has emerged from Asia's meltdown pretty much the same - and worse in terms of restructuring politically connected companies. Domestic enterprise is dominated by poorly managed, politically connected conglomerates, and is overwhelmingly financed with debt. There also is little pressure for transparency and accountability to shareholders."
This prompted a response from Dr. Victor Wee, director of macroeconomics and evaluation section of the Economic Planning Unit in the Prime Minister's Department, and made public by the National Economic Action Council, who said that Malaysia had not avoided reforms in the corporate and the financial sectors.
I would concur with another commentator who said:
"In spite of concerted propaganda to project an image of reforms and robust recovery, there has not been genuine reforms by the Malaysian Government – the kind that would restore enough health to sustain long term growth, not the kind that only give temporary relief to the symptoms.
"The latter, which are practised by BN, include overemphasis in pushing up the stock market (good for the election), rolling over debts of mainly crony conglomerates by Government without commensurate corporate reforms (only served to delay the time bomb), forcing bank mergers to achieve size but not quality (banking imprudence, smacked of greed and politics), revival of uneconomical mega spending (short sighted boosting of economy)."
Malaysia in fact is the only Asian country which rose from the ashes of the Asian Crisis without having its cronyistic wings clipped.
Finally, I wish to express my agreement with what Mr. Cheah Kah Seng said earlier, that as an investment analyst, he would make the "upfront recommendation" to Sell BN stock and BUY BA stock - or in investment industry language, increase weighting of BA or Barisan Alternative to over 33%.
Kah Seng’s reason for his recommendation is simple, to use his words:
"Because today’s political decisions affect our personal wealth for the next, perhaps 10-20 years, and there are many danger signs ahead, we need more Opposition law makers and policy watchdogs to ensure better quality and more consistent policies. In BA, we have a coalition that gives us the best hope of a rational government and peaceful changes. Why wait until the economy and institutions deteriorate beyond repair?
"They are not even talking about majority control. I think they are only interviewing for trial employment. If they do well, vote them in with a majority in 2005. By that time Lim Guan Eng will be back in Parliament. It will be sweet vindication for him to join other Barisan Alternative MPs in voting out bad laws, including the Internal Security Act and the Printing Presses and Publications Act, which once incarcerated him and many others on an unjust basis.
"It may be Malaysia’s turn for a lost decade - if the government does not change its way. To boot out a whole government now is too sudden. I recommend a probation period for both the BN and BA, during which the BN loses its 2/3 majority. Then if the BN does not improve, boot it out in five years."
(22/10/99)