Budget revision must be debated in Parliament

When debating the revision to Budget 2016, the most crucial question is where is the Malaysian economy heading, as the high oil price era draws to an end.

COMMENT

By Liew Chin Tong

For two consecutive years the Federal Government and the Treasury prepared the Federal Budgets (2015 and 2016) just to be ridiculed for its failure to anticipate the right level of oil prices.

More importantly, the Government has no clue as to how to deal with the end of the era of high oil prices.

When Budget 2015 was debated in Parliament, I called on the Government to revise (lower) the estimated level of Brent oil price but it fell on deaf ears. Budget 2014 set the oil price at USD 110 per barrel while Budget 2015 set it at USD 105 per barrel.

The Government was eventually forced to concede and announced in January 2015 that it was basing the Budget on a Brent price of USD 55 per barrel which I then said was still too high. The average oil price for most parts of 2015 went below that price.

Budget 2016, which set Brent price at USD 48 per barrel, was just passed by the Dewan Negara last week. There are now talks and hints by Minister Abdul Wahid Omar, Deputy Minister of Finance Johari Abdul Ghani, and Treasury officials of a revision of Budget 2016 in January 2016.

What a complete waste of time!

First, the Government and Treasury should not have presented a budget that was based on unrealistic oil revenue forecasts just in the hope to fool the people and rating agencies of its unrealistic deficit target. The people and the rating agencies are smarter than the Government assume them to be.

Second, an amended Budget must be passed by Parliament. In the past two consecutive years, Prime Minister and Finance Minister Najib Razak could have heeded our advice and amended the Budget during the parliamentary session as events unfolded. Instead the amendments to the Budget (which is actually a piece of parliamentary legislation) has now been done outside of Parliament.

The Budget 2016 should be revised in the January 2016 sitting of Parliament to allow for parliamentary debates on the revision and its welfare impact on ordinary Malaysians.

The Government is likely to cut further on welfare items but will keep the allocations to the Prime Minister’s Department intact. The Treasury must present to Parliament the impact of its budget revision on ordinary Malaysians.

But fundamentally, when debating the revision to Budget 2016, the most crucial question is where the Malaysian economy is heading, as the high oil price era draws to an end.

Since the Iraq War in 2003, with brief interruptions in the last quarter of 2008 and first two quarters of 2009 during the initial stages of the Global Financial Crisis, oil prices have been hovering mostly around USD 80 per barrel for the past 12 years.

Over that period the Malaysian Government has grown to be heavily dependent on oil revenue to finance wasteful spending. 30 per cent to 40 per cent of government revenue comes from oil.

As the Government doesn’t need to grow the real economic sectors for taxes, there has not been much growth in productivity, skills, technology and wages over the past decade or so.

The Government suffers from a “resource curse” – the abundance of resources breeds complacency and downfall – while the economy suffers a “Dutch disease” of premature de-industrialisation.

The Malaysian economy is overly dependent on oil and gas, commodities and property development.

Hence, the debate about the Budget 2016 revision must not be confined to how much Brent price should be set at but to the question of the future of the Malaysian economy at the end of the high oil price era.

Liew Chin Tong is DAP National Political Education Director and MP for Kluang.