Is debt why Harapan can’t fulfil election promises?

QUESTION TIME | The simple answer to that question is no! Pakatan Harapan cannot fulfil their promises because they promised too much in too short a time. They have lost a huge amount of revenue because of the implementation of one promise - the effective abolition of the goods and services tax or GST. That is the main cause of their problems now, not debt.

Almost all of their manifesto promises are good and much of them do not need money to be implemented but could raise bucketfuls of cash in the future especially if measures proposed for proper governance, tender processes, procurement cutbacks and reducing wastage are implemented.

But the issue of debt has been very conveniently used as a scapegoat for postponing some of the election promises by classifying other items as debts and pretending that these were not in the public domain before. That’s not nice, to say the least.

If indeed debt is the problem, then it is incumbent upon the Harapan government to clearly show how this is so and how the repayment of debt, contingent liabilities and others have impacted revenue and by precisely how much. Only then is it possible to blame debt.

Instead, Finance Minister Lim Guan Eng has taken it upon himself to redefine debt to include contingent liabilities and obligations under private-public partnerships as federal government debt to increase the figure to over RM1 trillion which is not the internationally accepted definition of debt. The federal government debt is still RM687 billion, as Lim himself conceded later.

That caused some amount of confusion in the marketplace which assumed for a while that Lim was implying that the government debt figures were unreliable. However, it did not take long for the marketplace to figure out that much of the information was already in the public domain.

True, you have to take into account the contingent liabilities, which include government guarantees and you have to take into account the kind of public-private partnerships. But for the latter, you have to take into account the capital costs of the project, which Lim revealed was RM63 billion, instead of the RM201 billion which is the sum of all lease and rental payments over the period of the partnership.

If at all there is a revenue shortfall in government, it is because the government zero-rated the GST so that no one pays this tax anymore. On top of that, there is a tax holiday of three months from June 1 where even the reinstatement of the old sales and services tax or SST won’t take place, which will lose even more revenue.

Let’s look at each of Harapan’s campaign promises for the first 100 days.

1. Abolish the GST and take steps to reduce the cost of living. GST collected RM45 billion in 2017, reports say, while implementation of SST is expected to garner perhaps RM17 billion yearly. That means a revenue shortfall of RM28 billion. Since there is a tax holiday of three months, add to that revenue not collected for three months from the SST which is some RM4 billion rounded off, taking revenue shortfall for this year to RM32 billion already. But Harapan has achieved its main campaign promise, misguided as it was.

2. Stabilise the price of petrol and introduce targeted petrol subsidies. The Harapan government has said that this amounted to RM3 billion, most of which will help those who use more petrol and takes the revenue shortfall figure to a massive RM35 billion. Again, Harapan has fulfilled one of its key promises.

3. Abolish unnecessary debts that have been imposed on Felda settlers. It’s not been announced how much this will be but again is an ill-considered move since the settlers took a risk by making an equity investment.

4. Introduce EPF contribution for housewives. This is being introduced via a deduction from the husband’s portion instead of a full contribution from employers and employees.

5. Equalise the minimum wage nationally and start the processes to increase the minimum wage. This will not cost the government anything initially and can be done gradually to increase the wage to RM1,500 per month.

6. Postpone the repayment of PTPTN loans by all graduates whose salaries are below RM4,000 per month and abolish the blacklisting policy. Again, there has been no announcement of how much this will involve.

7. Set up royal commissions of inquiry on 1MDB, Felda, Mara and Tabung Haji and to reform the governance of these bodies. This does not cost the government anything and it’s a mystery why nothing has been done. Instead much seems to rest on the shoulders of the so-called council of elders and their subcommittees which is not the same thing.

8. Set up a special cabinet committee to properly enforce the Malaysia Agreement 1963. Again, this costs the government nothing and it is puzzling why nothing has been done towards this.

9. Introduce the “Skim Peduli Sihat” with RM500 each for the B40 group for basic treatment at registered private clinics. There is no announcement of how much this will cost to date. It would have been better to implement this than the subsidy on fuel.

10. Initiate a comprehensive review of all mega-projects that have been awarded to foreign countries. This will cost very little but the potential for gains are large. However, it seems to be done on a rather piecemeal basis without multi-agency inputs and committees.

In summary, it is clear that debt is not the only problem facing the government. Because it has promised so much to the rakyat, it will forego some RM35 billion in revenue this year, the lion’s share of it from the effective abolition of GST, which cannot be easily made up in the short-term by cuts elsewhere.

It would not be far off the mark to say that the Harapan government’s revenue shortfall is almost entirely due to the zero-rating of the GST, rather than debt. Because of its promises and the fuel subsidy, it will have problems implementing other projects costing money. Period.

That is the dilemma facing Harapan now.

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P GUNASEGARAM says that it is always prudent to be careful about what you promise. E-mail: t.p.guna@gmail.com. -Mkini