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Monday, December 23, 2013

Approval rate and inflation rate — Lim Sue Goan

DECEMBER 22, 2013

DEC 22 — The Prime Minister’s approval rate has dropped from 62 per cent in August to 52 per cent in December and the biggest reason is, the reduction of government subsidies and good prices hikes have brought the people miseries.

The word 漲 (meaning inflation) has been chosen as the Chinese character of the year 2013 for Malaysia, reflecting the people’s grievances. If the inflation next year exceeds 10 per cent, the Prime Minister’s approving rate might set a new low record.

The overall direction of the moves of the government in rationalising government subsidies to reduce fiscal deficit; implementing goods and services tax (GST) to increase revenue to avoid burdening descendants, as well as rejecting the four demands of Congress of Unions of Employees in the Public and Civil Services (Cuepacs) to improve civil servants’ welfare, are correct to avoid fiscal deterioration.

Although the goal is correct, the planning and strategies used are full of mistakes. As a result, it seems like they are causing suffering to the people while the executive team is sitting back and relaxing.

Firstly, they lack a careful planning for the time to cut subsidies. The government had repeatedly postponed the move of cutting subsidies due to the general election and it immediately cut petrol subsidy, abolished sugar subsidy after the election. In addition, electricity tariffs and toll charges will be increased next year. How are the people and business operators going to bear the strong wave of price hikes?

Since the government’s debt is approaching 55 per cent of the Gross Domestic Product (GDP), the government is eager in controlling its debt, so it just takes measures without taking into account the civil and private sectors’ acceptance capability.

Subsidy reduction should be done gradually to reduce the pain. It is inconsistent for the BN to blindly please the people before the general election but stressed after the election that it does not practise populist approach in national administration.

Secondly, shouldn’t the government strengthen the resilience of the civil society and industries before rationalising subsidies?

For decades, the government has subsidised the people and businesses with revenues of the national oil company, causing the lack of competitiveness and productivity in all areas.

Even though the country has spent a great amount of resources to develop education, no significant progress has been made due to racial policies and political interference. The number of students scoring straight As in government examinations increases every year but their true abilities show when they come to international assessments like the Programme for International Student Assessment 2012 (Pisa ).

With such competitiveness, how are we going to survive with the absence of protection after subsidies are abolished?

A smart government should have a set of sound economic growth strategies, including good management, so that the people can be self-reliant.

The government lacks foresight in management and relies only on the huge oil revenues over the past few decades. It has become excessive generous, resulting in a swelling executive team requiring the government has to pay over RM10 billion of salary each year.

The government is currently highly dependent on the iron votes of the 1.4 million civil servants and thus, it dares not to cut administration expenditures while not being able to curb waste and fraud. Therefore, it suffers overruns every year and now, it can only cut subsidies.

Allowing highway concessionaires to increase toll charges every three years is also a result of poor management. The number of cars on the road increased 600,000 each year and thus, it is a business that will never suffer losses. Then why should it be specified in the concession agreements that the government must compensate if it does not allow toll hikes? The negligence has heavily burdened a few generations of people.

Politically, to implement the Bumiputera economic agenda, Umno has continuously supported Bumiputera entrepreneurs, including the issuance of government projects. However, many projects are full of flaws, forcing the government to spend more money to remedy the situation, such as the Serdang Hospital had cost the government RM30 million of repairing fees. How long can the government sustain it?

If subsidising necessities does not bring economic benefits, then political subsidies and appropriations should also be cut as soon as possible or it will be difficult for the government to justify its move.

Subsidy rationalisation should be a continuous process, instead of distributing money during election and reducing populist measures after election.

In addition, the move of allowing toll charge hikes has also violated the BN’s election manifesto.

Since there are too many inconsistencies, it is not surprising that in the latest polls, more than half of respondents said that they do not believe in the government’s economic growth statement.

Price hikes, the implementation of minimum wage system and the reduction in the US quantitative easing (QE) are expected to make the economy next year thorny. Once manufactures can no longer bear the increased costs, the exports will slump and the domino effects could collapse the economy.

Some non-governmental organisations (NGO) have called for a mass rally on December 31, making people realise that 2014 would not be an easy year. Najib must learn the lessons of former Prime Minister Tun Abdullah Badawi, who had failed to control price rises during his term and resulted in massive public grievances, which had later turned into a strong civil force.

The people’s perception towards government has also dropped to 38 per cent and if the support rate does not rise, the Sarawak state election, which must be held no later than in 2016, should then be a very challenging battle for the BN. —

* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malay Mail Online.

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