Let’s face the tough times ahead as a nation. It’s going to be a rough ride, so please don’t make things worse.
THE Prime Minister, who is also Finance Minister, has always made it a point to meet journalists to give the outline of his Budget speech a day before he delivers it.
It is an off-the-record session where he emphasises the salient points and allows free flow of questions and answers after that.
This year, Datuk Seri Najib Tun Razak started the session with a straightforward comment. Looking at the journalists, he said 2016 would be a challenging year. Then, he corrected himself, saying that would be an understatement. It would be a tough year.
The country’s economic fundamentals may still be strong but the reality is that the prices of oil and commodities have taken a beating while the advanced economies, including China, have slowed down.
No one would have expected the collapse of the oil market a year ago. The Budget then was made on the assumption that the price of crude oil would be US$100 a barrel but as it dropped, adjustments were made.
But the price of crude oil has continued to be unstable. Late Friday evening, after the PM had delivered his speech, the United States had an upbeat report that the price of oil was holding steady, reportedly finding support from brighter economic data and a global stock market rally after the European Central Bank signalled more stimulus measures.
A report said the positive tone has offset persistent concerns over a glut in global crude oil and refined product supplies that have battered the energy market for over a year.
Benchmark Brent crude oil was 8 cents higher at US$48.16 a barrel by 0700 ET after settling up 23 cents in the previous session. US crude for December was down 10 cents at US$45.28 a barrel, having risen 18 cents on Thursday.
The ringgit, having plummeted to 17-year lows in recent weeks, rallied to 4.222 ringgit against the dollar on Friday after the Budget was presented, it was reported, while the stock market ended 0.34% higher before Najib finished his speech. But not many are convinced the price of oil will hold in the short term, or even long term. There is also pessimism of the local stock market, given the coming economic outlook.
It has not been an easy Budget to table, and surely it must be the most difficult in his career, as Najib admitted to the media on Thursday. He had to balance the need to mitigate the increased cost of living and, at the same time, keep a tight hold on the purse.
There are some realities that Malaysians have to face – the price of oil has an impact on our ringgit, as we rely heavily on oil for our revenue, and the depreciation of the ringgit has hit us badly.
It is beyond Malaysia’s control and if we think that 2016 is bad, then we have not been realistic as many expect the difficulties to drag until 2017 and even 2018.
There’s no point in blaming the PM for the depreciation of the ringgit and, for that matter, the decision to increase the toll rates which is part of the deals that were inked long before his term. We can be critical of Najib’s administration but we have to be fair. Admittedly, the current domestic political issues have not helped.
The private sector is struggling to keep down its operating expenses as revenue takes a beating. Already employers, including banks, have started to rationalise their work staff, offering mutual separation schemes.
A business magazine reported that our banks have discovered that it is no easy task to achieve the headcount reduction, given the soft job market and economic uncertainty.
One financial firm’s recent exit scheme for its 17,500 workers could not meet its target of 15% or about 2,600 employees, the report said, after the offer closed last month.
Another bank, which announced its MSS in May, also could not achieve its target as only 11% of the staff responded.
The market sentiments have been poor this year and the hugely unpopular Goods and Services Tax (GST), which was introduced in April, has not helped.
But Najib has said that without the GST, the Government would be hard-pressed to pay the salaries of its 1.6 million civil service.
If sales and services tax was retained, collection would have been only RM18bil compared with GST revenue of RM39bil.
The rating agencies would have also downgraded Malaysia’s credit standing, resulting in more costly borrowings for the country and even individual loans, Najib explained.
From the Government’s point of view, the GST has been a saviour although the large majority of Malaysians would probably disagree.
There is also another political reality – the civil service remains the backbone of the administration and has strongly backed the ruling party. Najib on Friday announced an allocation of RM1.1bil for the civil servants’ salary increases.
The faithful rural voters were also rewarded as more funds were given to the rural areas, with money to improve infrastructure in villages, including building houses, water supply and other projects.
Several infrastructure and social incentives were given to Sabah and Sarawak, two states crucial to the Barisan Nasional.
No toll will be collected when the Pan-Borneo Highway is completed in 2021 while an interest-free loan of RM50,000 would be extended to the building of every longhouse unit.
For the middle class, though they would like to have more goodies, the higher tax relief for their children in college as well as for medical expenses of their parents should go down well.
In planning this Budget, the Government has the uncomfortable task of helping the huge rural base, bolster economic growth in the face of a weak global market, and having to raise money to bring down the fiscal deficit.
Malaysians, in general, understand the difficulties ahead. As loyal and patriotic citizens, we would want to play our part but we also want to see financial leakages and wastage be reduced, if not eliminated.
There should be zero tolerance for corruption, which has made doing business more expensive and, worse, inflate the cost of development, especially projects meant for the people.
We want to see Malaysia recover quicker and for sure, we must stop racist politicians, especially those who appear to have the carte blanche to instigate racial sentiments.
They do not help to make Malaysia be seen as a moderate and stable country, which is essential to attract investors. To put it bluntly, they are a complete disgrace to all of us and surely a political liability.
Let’s face the tough times ahead together. It’s going to be a rough ride and we need all the help to go through the choppy waters. Wong Chun Wai The STAR Home > Opinion > Columnists On The Beat Sunday October 25, 2015 MYT 12:00:00 AM