Datuk Seri Najib Razak’s Budget 2011 speech today confirmed the return of big Malaysia, with a slew of announcements headlined by the construction of a 100-storey tower in the heart of Kuala Lumpur and the widely-expected Mass Rapid Transit (MRT) system for the city.
The prime minister appeared today to reach for the old mega-project playbook, particularly through real estate plays, in his bid to lift the economy towards high-income status.
This would disappoint Malaysians hoping for more radical reforms in terms of upgrading the nation’s productive and innovative capacities.
.Datuk Seri Najib Razak and Tan Sri Muhyiddin Yassin (right) pose in the Parliament lobby after the announcement of the 2011 Budget.
Among large construction projects that will kick off under the 2011 Budget are the RM43 billion new KL MRT project; the RM5 billion 100-storey Warisan Merdeka tower; the RM26 billion KL International Financial district; the RM3 billion integrated eco-resort in Karambunai, Sabah; construction of multiple new highways; and the development of the 1,084-ha Malaysian Rubber Board land in Sungai Buloh.
The 2011 Budget was deemed a dipstick of the current administration’s commitment to reform but the highlights appeared to be largely big-ticket construction projects rather than commitments to drastically restructure the economy by revamping efficiency, productivity and innovation.
Mega-projects also characterised Malaysia’s development under the 22-year Mahathir administration, which featured the construction of the RM25 billion Putrajaya administrative centre that has been panned as “extravagant”, and the troubled RM7.3 billion Bakun Dam.
Under Tun Dr Mahathir Mohamad, the country also saw the construction of the iconic Petronas Twin Towers, which, when completed, was the tallest buildings in the world.
While Najib stressed today that the private sector should lead economic growth and the government’s bold moves to spend on infrastructure should boost investor confidence, some observers complained that there were no efforts cut down the size of government’s operational expenditure.
Chief executive of the Institute for Democracy and Economic Affairs, Wan Saiful Wan Jan, noted that 75 per cent of the government’s budget — RM163 billion — was for operational expenditure.
“This means the government is committed to maintaining a bloated civil service, with civil servants devouring 75 per cent of the allocation!” he said in a statement to the media.
“I do not see how this Budget is coherent with the prime minister’s intention to let the private sector lead the economy. It seems like the size of government is going to be as big as ever, if not bigger.”
He added that the Budget looked very much like a preparation for a general election.
“There are promises for more money for JKKK, KAFA teachers, and imams, as well as price cap for PLUS tolls, and various other ‘carrots’ are being dangled to voters,” said Wan Saiful.
The prime minister insisted, however, the Budget was designed to meet the aspirations of the public and that the government would not take the easy way out or sacrifice the nation’s long-term interest for short-term popularity.
“We are not dreamers,” he said in his budget speech today. “We are realists. Our success is not mere coincidence but the result of clear and careful planning as well as firm implementation.”
Analyst reaction to the budget was mixed, with some calling it “foundational” and others saying it lacked the push for reforms, such as a more aggressive attack on the deficit.
HwangDBS Investment head of equities Gan Eng Peng noted that the source of funding for mega-projects remained unclear and added that the market is weary of too many federally-guaranteed semi-government entities raising money from the market.
“This is in effect government ‘off balance sheet’ fund-raising and if added back to the budget, is in fact increasing the deficit,” he said.
RAM Holdings chief economist Dr Yeah Kim Leng said the Budget sets the stage for the Economic Transformation Programme and that the smaller-than-expected cut in the deficit was understandable given the economic uncertainties in the US and Europe.
“It has all the hallmarks of a consultative budget and a foundation-setting budget with a lack of surprises,” he said. “We see a small increase in spending levels but we are not uncomfortable with it as the external environment could pose headwinds.”
Among other key points of the Budget were a rise in service tax from five to six per cent, reduction in permanent residence application submissions from 10 to five years, and no increase in PLUS highway toll rates for the next five years.
