When Things Go Bang!
This is a frightening budget that is laced with potential asset bubble creation, the Najib’s administration seems to be throwing caution to the winds with increased spending on the economy and on implementation of more mega-projects.
The mega-projects that is on stream in the country is frightening and we will name them as we go on, Najib is making Mahathir look small as compared to the numerous mega multi billion expenditure during his short administration, when other nation are being cautious in this time of global economic uncertainty, Malaysia is all go like in an F1 Race.
One thing you can take note of the Malaysian budget is that they will always for certainty, spend all of the budgeted expenditure. The budget will be fully draw on or many a times overspend the budget with objectives falling short. They will spend all the budgeted expenditure and will fall short of economic objectives and a example will be the NEP after more than 30 years and the objectives are still reportedly far behind but the monetary allocation budgeted for the objective have all been spent many times over and today the majority of the household are living in hardship, much worst of than before.
We are a nation consistently recording a budget deficit and is borrowing huge amount to finance this deficit, although they have announced a reduction in deficit slightly to 5.6 percent of GDP for 2011 but the borrowings will be the same if not more due to the growth of the GDP of 7% in 2010. This will add to the national debt which will surpass the RM400 billion in cumulative debts. And we will have to finance this debt and interest payment alone will easily be over RM 25 billion per annum.
Note that the national debts are for direct government borrowings and other indirect borrowings on federal government guarantees might not have been accounted for like the PKFZ as an example, that is to say that other borrowings from GLCs and other agency or private entity which might have financed their mega-projects through government guarantees might not be reflected in the government accounts and could be contingent liabilities and are not reflected in the books..
On top of this deficit the operational expenditure will yet again increase by 7 per cent or 10.6 billion ringgit from 152.2 to 162.8 billion ringgit, this is just administrative expenditure and does not contribute directly towards the development of the economy but instead shows a lack of prudence and operational inefficiency in the administration despite of projecting a slower economic growth of 5 to 6 per cent in 2011. Operating expenditures has more than doubled since 2004 when it was at about RM80 billion and now it is more than RM160 billion.
We will not go into details of the budget here as it is already written in by the various media and it is the intention to focus on the various multi billion mega-projects from the Najib government. And as usual they will not provide details like how the project is being funded until only when something goes wrong or when someone exposed some wrong doing.
As usual no details of any tender of the mega-projects are undertaken and are probably awarded on a friendly basis.
