Monday, September 24, 2012

Cost impact of Pakatan Rakyat Dream and Promises..

This article originally came from my Facebook friend , Margret Reborn . Thanks to her for the analysis. It show how Pakatan promises for PRU-13 can jeopardize Malaysia to become a bancrupt country just within 2 and half year . Pakatan's leader always mention they have all the mechanism to implement their promises , but just imagine even developed countries which implement similar policy such as Greece, Cyprus, Spain, Ireland have problem to sustain , then what about a government led by bunch of people have 0 experience running a country ? Ok , I might be wrong , one of them have the experience to run a country but of course he almost get Malaysia doomed during 1998 financial crisis when trying to 'deal' with IMF . Luckily, our ex-PM Tun Dr. Mahathir was quite sharp and overcome the crisis by his own way.

 from Margaret Justice ; Let’s just put the cost of the opposition’s promises into context. The federal government budget for 2012 was RM 232.8 billion. The opposition’s electoral promises alone account for almost 90% of the total federal government’s budget. So if it were to fulfil its promises in the first year of office, the government would effectively not have enough money to pay the salaries of teachers, doctors, nurses, police and army personnel, let alone have the funds for building roads, schools, hospitals or providing welfare assistance to the poor. Most of the money would have been used to deliver on its Jingga promises.

If this happens essential services would grind to a halt and the country would cease to function. If it decides to borrow more money to fund its promises and keep government going, the fiscal deficit would balloon to more than 25% of GDP and Malaysia would effectively be bankrupt within the first two years.

 Put this argument to the federal opposition and it will come back with its classic argument. It will “get rid of corruption” and this will pay for its promises. This is its panacea to the country’s ills, and silver bullet when confronted with charges of populism and the question of fiscal discipline. But can getting rid of corruption pay for its promises?

 Let’s analyse the 2012 federal budget. Of the total RM 232.8 billion that was originally budgeted, RM 148.5 billion (63.8% of the total budget) was earmarked for salaries of civil servants as well as fixed charges and grants such as subsidies, servicing debt, scholarships, research grants and funds for state governments. These are all fixed charges or payments. That leaves RM 84.3 billion for procurement-related spending, whether it is purchasing supplies, services and assets or paying for projects under development expenditure. 

Since corruption and leakages can only occur for procurement-related expenditure as opposed to fixed charges like salaries, any savings can only be made from this portion of the budget. If you get 10% savings from procurement, that would be just RM 8.43 billion extra - hardly enough to pay for the opposition’s election promises. Even the entire sum related to procurement expenditure - RM 84.3 billion - is short of the RM 206.5 billion needed to pay for its promises to Putrajaya.

The key point is this: It is easy to say that savings can be made by reducing leakages, but nobody really asks how much you can save. While 10% of procurement - related items can yield a significant figure as explained above, but it is not so significant when measured against a slew of promises that cost so much more to fulfill. 

So, it is not enough for the federal opposition to say its can save from getting rid of corruption. That alone - even if it can be done - is not going to pay for its pledges. It has to tell Malaysians how else it will raise the money. Will they borrow more? What programmes will it cancel? Which projects will it scale down? Which schools and hospitals will it not build? What taxes will go up? How many civil servants will it lay off?

Unless the opposition can answer these hard questions and explain how it will raise the money to fulfill its promises instead of copping out with the corruption explanation (which doesn’t add up), we can safely assume that either it will drive Malaysia to ruin by spending what we don’t have or, in fact, they have no intention whatsoever of fulfilling its promises because it knows it simply can’t pay for them.

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