By Lim Sue Goan
Translated by Dominic Loh

There could be possibly some brief sessions of free lunches in politics, but they won’t last forever. The national Budget that comes after so many years of generous handouts, it’s now time for Malaysians to pay foot the bill.

From Mahathir, Abdullah to Najib, they have all tabled “painless” budgets during their tenures as finance ministers.The size of handouts could vary, it is nevertheless invariable truth that some form of goodies could be expected from them year after year. For example, bonuses for the country’s civil servants.

To please the public, the budgets have remained in the red for the past 17 years, culminating in sky-high public debts. We can no longer be this generous any more. If the government fails to stay prudent in managing its expenses in a bid to lower public debts, our sovereign ratings will be slashed. As a consequence, we have trimmed deficits, zero sugar subsidies and imposition of 6% GST, among others.

Najib has attempted to cut down on expenses ever after he assumed office. For instance, the total allocation for 2010 Budget was 11.2% lower than the previous year at RM191.5 billion. Unfortunately because of overdraft, the government still needs to seek parliamentary consent for supplementary bills every year.

To improve its chances of re-election, the BN government has been offering generous aids, resulting in uncurbed expenses. Administrative expenses have reached the level of 80% of total government allocations.

From the themes of budgets tabled over the past five years, we could see that Najib has strived to pursue economic prosperity.In 2010 we had “1Malaysia, shared prosperity,” in 2011 “Transformation into a high-income nation,” 2012 “National transformation program to preserve economic prosperity,” 2013 ” and for 2014 “Strengthening economic resilience, accelerating transformation and fulfilling promises.”

But, from the developed status advocated by Mahathir to Najib’s high-income country, despite the fact that the government has been handing out so much of subsidies and assistance over the years, many Malaysians remain financially strapped. Why?

If we can achieve the goal of developed nation status two years ahead of our deadline in 2018, i.e. with a per capita income of US$15,000, why do our household debts remain at a staggering RM784 billion?

Judging from the ratio of household debts to disposable income of 194% in 2012, we are at a more alarming level than that of the United States during the 2008 subprime crisis (130%). Although we have accumulated more and more wealth at the same time, our credit growth has expanded faster than our GDP at about 83% of GDP, anticipated to expand further to 97% by 2018.

Which means, if we are not going to cut down on household dents, even if we make it to the ranks of high-income nations, we will be hard pressed under mounting debts.

The minimum salary scale and generous distribution of money by the government will only increase the superficial income of the people, as their disposable income has been largely eroded by skyrocketing living costs, debts and property prices. Subsidies and handouts can no longer fix our problems.

According to the survey conducted by Kelly Services, the salaries of Malaysians only grew by a meager 2%-6% over the last ten years, with 34% of employed Malaysians living under the RM720 national poverty line. The Statistics Department pointed out that the average monthly expenses of Malaysian families rose from RM1,953 in 2004/05 to RM2,190 in 2009/10, up 12.1% at a rate apparently much faster than income growth.

Unless we are able to drastically enhance our productivity, or there is no way for us to see bigger growth in income. Depressingly, the government has allowed unchecked entry of foreign workers into the country, suppressing further the magnitude of upward income adjustments.

On the other hand, high inflation has sent living expenses sky high, and this could be attributed to the failure of self-sufficiency in food supply that makes us vulnerable to staggering international food prices. The weakening ringgit has increased the prices of imported raw materials and manufactured products.

Unless we can truly transform our national economy, from being labor-intensive to knowledge-intensive, we cannot expect faster growth in our incomes, and lower- and medium-income Malaysians will continue to suffer.

Even though the GST is seen as a more equitable form of taxation–as the more a person spends, the more taxes he or she will have to pay–and that many essential items and services are in the exclusion list, poor people still have to pay the taxes as they need to buy clothes and shoes for themselves of their children.

Moreover, the 6% GST rate to be imposed is a little too high, and this will aggravate the inflationary rate and dampen domestic demands. Perhaps the government can consider imposing taxes on the wealthy to fund its social welfare programs.

The 2014 Budget will not address the plight of Malaysian families.The government needs to modify its policies and implement the New Economic Model in order to effectively fix our problems.

* The views expressed in this article are the personal opinion of the columnist and this article first appeared in SinChew Daily