Tuesday, October 27, 2009

Blogs & Budget 2010

I haven't been writing of late basically because I have been very busy, including three weeks of ale and fish and chips. Second, I feel there is nothing worth my trouble to put thoughts to print - not even Budget 2010. Third, blogging has failed to become a pleasant thing for me to do. I write to entertain, not to please. I write to provoke, not to justify. The sanctity of the freedom to think and write is paramount - I am wry of thought-police.

Nonetheless, there are 3 things I can say about Budget 2010.

1. Budgets, by definition, are basically about the government's finances. Should the government balance its budget? Yes, if you can't borrow any more. No, if you can continue to live on credit. This question is important because it affects all the other issues. Budget 2010 promises to bring down the deficit as a proportion of the national income. This percentage balloons in recent years for two reasons: that the national income failed to grow or even contracted, and that as a result the government borrowed more to try to beef up the economy. This is a double whammy for the target percentage but it is something that one should expect. Once the economy recovers strongly, we will see a sharp reduction of that percentage by virtue of the improvement in the denomination of the measurement. Budget 2010 expects its deficit to fall to 5.6% of GDP from 7.4% in 2009 as a result of a sharp reduction in the Federal Government's operating expenditure - if this effort fails, the deficit will be back up to 7%. But it doesn't matter.

2. The direction of Federal Government spending especially development expenditure is crucial because it is strategic. It is a bit off the point when the government is talking about the efficiency of spending - although important for the purpose of stopping a corrupting culture - but not for saving the economy from nosediving further or turning it around. The government should spend to build new foundations for the new economy. Properly educated children is necessary but not sufficient. We have to lay the foundations for our technological base. Importing expensive foreign machines is a first step so long as we have money. But getting our young men and women to invest their time and talents to build sophisticated things need to be encouraged. I am happy with some encouragement for the arts (RM200 million) but I hope will not be squandered on some undisciplined wannabes. Creativity is serious business.

3. The 15% flat income tax for Iskandar Corridor is a curious case. While it is now unfair by being preferential, it cannot be removed at all in future without the collapse of Iskandar. The only future move for it must be, if it proves itself to be good, to apply it nationwide. The whole country should be competing with the rest of the world, and not Iskandar competing with the rest of the country.

In all, Budget 2010 is champagne without the bubbles. To be fair, it is only an annual budget. The bigger directional one must be the 10MP.


hishamh said...

Welcome back!

de minimis said...

Echoing hishamh, welcome back to the blogosphere, O' Guru.

fahmi8881 said...