Umno MPs say Idris ‘bankrupt’ claim far-fetched

(Bernama) – Some government backbenchers have labelled a bankruptcy forecast for Malaysia as a “bit far-fetched”.

They have dismissed the notion that “Malaysia will go bankrupt in 2019 like Greece” if the RM74 billion annual subsidies are not slashed as more of a “scare tactic”.

They felt that the comparison with Greece by some quarters was “way off the mark” with little analytical basis.

“Pemandu is just jolting us to not live beyond our means,” the MP for Johor Baharu Datuk Seri Utama Shahrir Samad, said when responding to Minister in the Prime Minister’s Department Datuk Seri Idris Jala’s recent statement.

“It is jolting us out of our complacency,” he said.

Explaining why Malaysia will not go bankrupt like Greece, the former Domestic Trade and Consumer Affairs Minister presented a comparative study of the two countries.

He said Malaysia had, more importantly, the ability to pay its interest payments, unlike the Greek government which had defaulted on interest payments, thus lending credence that Greece can be said as bankrupt.

He also said that Greek civil servants had a permanent bonus of two months, and they made up 10 per cent of the population and were also perceived as not that productive.

Shahrir said Greece was also overly reliant on tourism, and was resource-scarce and had no commodities. On the other hand, tourism was just one of many economic activities in Malaysia while its other economic activities were well-diversified, he said.

Shahrir said Greece had to borrow just to pay interest while Malaysia had never defaulted on its interest payments.

He also stressed that Malaysia had built a strong financial system stemming from the consolidation of banks, cleansing of non-performing loans out of the system after the 1997 financial crisis through institutions like Danamodal and Danaharta.

Sharing the belief that the Malaysian economy had improved and along with it the government machinery as well, including the collection of taxes, Shahrir also said that the government had also reduced wastage and leakages by progressing to e-procurement to save money.

“In the 2010 Budget, the government had agreed to a 10 per cent across-the-board expenditure cut in all ministries,” he said. “We have already spent on big ticket items like the North-South Expressway and Penang Bridge. So now the biggest government expenditure is the subsidies.”

“The ongoing effort now is to improve the economy by promoting greater efficiency and productivity through the New Economic Model,” he said.

In analysing Idris Jala’s pronouncement on a technically economic view, Umno Youth chief Khairy Jamaluddin asked for an understanding of bankruptcy.

“In a nutshell, it’s a situation when you are no longer able to pay your debts and the next question will be, is that the (actual) reading of our economy?”

He contended that if the Malaysian economy was scrutinised from the point of national debt, savings rate, deficit level and trade performance, it was fundamentally stronger than Greece.

A further analysis, Khairy pointed out, would reveal that:

• Malaysia’s national debt was 54 per cent of GDP, less than half of Greece’s 113 per cent debt;
• Malaysians enjoy a high savings rate of 35 per cent of GDP, which is seven times higher than Greece’s five per cent;   
• Greece’s 2009 budget deficit of 13.6 per cent of GDP was 2.4 times higher than Malaysia;   
• Malaysia gained a RM118.4 billion trade surplus in 2009 while Greece recorded a RM105.7 billion deficit in the same period; and in March 2010, Malaysia’s international reserves stood at US$95.3 billion, 17.3 times higher than Greece’s US$5.5 billion.

Khairy also referred to the analyses of two rating agencies — Fitch Rating Agency and Standard & Poor’s — to strengthen the case that the Malaysian economy was relatively sound.

Greece’s long-term debt ratings were downgraded as negative last December and its debt placed under “negative” watch. A further downgrading warning would be issued if the Greek government did not rein in overspending.

In contrast, Malaysia is planning a global Islamic dollar bond, which has been assigned with preliminary investment grade ratings of A- by Standard & Poor’s and A3 by Moody’s Investors Service.