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Budget 2023: Why We Are Not Addressing Financial Leakages & Wastages?

National Budget Malaysia Economy Deficit

Malaysia always had a deficit national budget where The Government had always spent more than what it can collect except for the so-called golden years between 1993 to 1997 when the budget recorded a surplus and also low deficit budgets in between. Image source: Trading Economics.

Be mindful that at this point, Anwar Ibrahim was the Finance Minister and he made sure that Government budget expenses were very much controlled and managed. Government debt to GDP was hovering at about 35% against the 2021 figure of 63.3% and one USD was equivalent to RM2.50 back then. This probably explains why in 1996, Anwar Ibrahim was named the Finance Minister of the Year by Asiamoney.

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Disclaimer

It is redundant now to discuss the recent Budget 2023 that was presented as the Parliament has now been dissolved and the country will be going to pick a new Government within 60 days’ time. However, it is not too late to discuss one key issue with the recent Budget which is the deficit between income and expenses.

The next Federal Government whether it is from BN or PH or even PN will still have this issue of a deficit budget unless they can manage their expenses and ensure it does not go into deficit.

Budget 2023 Malaysia

Total expenses are about RM372 billion against an income of RM273 billion and out of that, 12.4% or almost RM46 billion of it goes to paying debts. If the budget continues to be in deficit, expect this number to continue to increase. Image source: MOH / The Edge

Budget 2023: Salient Points

One can call it an election budget as the general elections may be held at any time and thus will see a lot of “goodies” for the people to continue to elect the current government.

2023 will be another year where the country will see the Federal Government present a deficit national budget which is a result of poor cost-cutting measures and poor collection of outstanding taxes and fines on top of the global economic recession.

  • Expenditure is seen at 372.3 billion ringgit ($80.06 billion) in 2023, lower than 385.3 billion ringgit in 2022.
  • 2023 development budget seen higher at 95 billion ringgit.
  • 2023 operating expenditure seen lower at 272.3 billion ringgit due to expected lower spending on subsidies.
  • Govt to spend 42 billion ringgit on subsidies in 2023.
  • Revenue collection for 2023 is seen at 272.6 billion ringgit, from 285.2 billion ringgit in 2022.
  • Petronas dividend is estimated at 35 billion ringgit next year, lower than 50 billion ringgit in 2022.
  • Allocation of 15 billion ringgit for long-term flood mitigation plans.
  • Govt targeting tourism revenue of 47.6 billion ringgit in 2023; 15 million foreign tourist arrivals

(Source: Reuters)

Budget 2023 will see a deficit of almost RM100 billion (not a small amount) and how the Govt is expected to fill this gap to sustain the goodies presented in the budget? Are we going to incur more debts?

Budget 2023 Income

A bulk of the money to spend on the budget is coming from borrowings – 26.8% or about RM100 billion. The question is whether we need to have borrowings just because we have leakages in our income and are unable to curtail expenses. Image source: MOH/The Edge

Budget 2023: Income Leakages Addressed?

Who is going to pay for the RM100 billion deficit?

“However, I am sceptical about how we are going to finance it as Budget 2023 predicts a drop in revenue collection.”

He said the weakening ringgit would make it more expensive for Malaysia to borrow money to finance such expenditure.

A new tax incentive announced in the budget to attract foreign investors was not likely to generate strong revenue, but he hoped it would result in more employment opportunities for Malaysians.

(Source: Free Malaysia Today)

If one sees, the progress of the Government managing its financial affairs, there seem to be too many leakages when it comes to sustaining enough income to address its expenses in the budget.

Budget 2023 JPJ PDRM summon discount

PDRM summons is usually discounted up to 50% whilst RTD summons is discounted up to 80%. The big question is why issue summons in the first when it is discounted in the end when the traffic offenders refused to pay their summonses on time. Image source: Wap Car

Traffic Offence Discounts

It is reported that PDRM managed to collect about RM1.3 million from 12.800 summons during a recent event. Apparently, there is still about 2.3 million summons that is still outstanding since 2014. So why PDRM is not enforcing the traffic offenders to pay these outstanding summons and add the collection to the Government’s income?

The latest round of such special offers by the police came last week. To mark the Selangor Keluarga Malaysia aspiration tour, traffic offenders were given a 50% discount on the penalty for compoundable offences.

Of course many were quite happy to pay up. As of 4pm on Saturday, 2,392 traffic summonses had been settled at the Shah Alam police headquarters and RM264,790 in compound fines collected, according to district police chief Iqbal Ibrahim.

It did not matter that double that amount could have been collected if the men in blue had not thought up such an irresistible offer.

Perhaps our authorities’ very forgiving attitude could account for Malaysia being among the 10 most dangerous places in the world to drive in.

Trouble starts when the recalcitrant road user keeps coming back for the “special offer”. Rather than a blanket discount, the police could perhaps take each case on its own merit.

(Source: Free Malaysia Today)

Enforcement is one thing but how this quickly becomes irrelevant when the punishment is discounted when the offenders refuse to pay for breaking the traffic rules? When there is no fear of punishment, expect the traffic laws to be broken over and over again. So why we are not cultivating a sense of paying for your crime without fail?

Najib Income Tax IRB Budget 2023

The outstanding income tax due to the ex-Prime Minister, Najib Razak is huge and this does not include the income taxes due from Najib’s children. The matter is now at the courts and this is probably the tip of the iceberg when it comes to the taxable income of some of the rich politicians. Image source: Reddit

Outstanding Income Taxes

Currently, the most famous tax evader in the country is Najib who is presently serving a prison sentence for the SRC case. He and his son owe the Inland Revenue Board almost RM1.7 billion in taxes and the matter is now being deliberated in a court of law. Then we also have this:-

The Inland Revenue Board (LHDN) has identified 31,598 entities, comprising individuals, businesses, companies and others, who have yet to declare their income.

LHDN said these entities, which include nearly 24,000 individuals, were identified based on asset ownership and their ability to secure loans and securities valued at RM500,000 and above.

“The tax losses suffered by the government are estimated at RM665 million. This is a significant amount and can adversely impact the country’s economic stability if not addressed immediately,” it said in a statement.

(Source: Free Malaysia Today)

These days, no one can easily escape from hiding their financial standings considering that banking transactions are clearly documented, reported to the authorities and will leave clear paper trails for auditors & investigators.

Budget 2023 PTPTN Education Loan

It is expected that PTPTN needs about RM4 billion per year to sustain the loans to students to study in the local universities and when these loans are not paid, there will be less money to be shared with new students. Image source: The Star

PTPTN Repayment Discounts

The objective of the National Higher Education Fund Corporation (PTPTN) is to provide loans at a flat rate of 1% to students who wish to further their students in tertiary education in Malaysia. These loans are expected to be fully repaid between 5 to 20 years depending on the quantum of the loan with some exceptions granted to exceptional students.

PTPTN is not a charitable organisation and yet we have this:-

National Higher Education Fund Corporation (PTPTN) study loan borrowers get a 20% discount off their outstanding loan balance upon full settlement beginning Nov 1, 2022 until April 30, 2023.

Meanwhile, those who pay off at least 50% of their remaining debt in a single payment or opt for salary deduction or scheduled direct debit in the period will also get a 15% discount on their remaining debt.

According to PTPTN’s Strategic Plan 2021-2025 report’s latest available data, the federal statutory body said as of end-December 2020, a total of 2.1 million borrowers should have repaid loans amounting to RM24.3 billion.

30.3% have fully settled their repayment, 10.3% are actively servicing loans based on the predetermined schedule, 41.3% are inconsistent paymasters, while 18.1% or 383,907 borrowers are categorised as defaulters amounting to a debt of RM4.6 billion.

(Source: The Edge Markets)

The funding for PTPTN comes from the taxpayers and considering that the interest is only 1% and payable over a long period, the repayment amount is very low as compared to personal loans from the banks. And yet there are people who take advantage of the system and refuse to pay even after they have graduated.

Yet as an upper-middle-income country that is on the cusp of developed-nation status, it is appalling that more than half a million Malaysian graduates have never paid off a single sen of their study loans with the National Higher Education Fund Corp (PTPTN).

The fact that 22.2%, or more than one-fifth, of graduates who took PTPTN loans have never made a single payment not only reflects poorly on the borrowers and the values that have been instilled in them but also the lender and its inefficiency in collecting what is due.

For one, the government must know the identity card and phone numbers of the 539,284 graduate defaulters. If all of them only pay RM1 a day, the government stands to collect RM196.84 million a year — a sizeable sum that could aid many others who are more deserving of cash transfers.

If the 539,284 defaulters pay RM100 a month, the government stands to collect more than half a billion a year. The potential collection could well double given that there are also 705,648, or 29.1% of 2.42 million, graduates who are paying inconsistently.

(Source: The Edge Markets)

Instead of granting discounts outright and to all, the Government should instead restructure the loan to a longer repayment schedule and determine the next course of action on a case-to-case basis.

Leakages in AG Report

Every year, the Auditor General’s report never fails to highlight a number of wastages and non-compliance of the various Government Ministries, departments and government-linked companies. And yet, there is no one time when the people who failed to follow the procedures and cause losses of taxpayers’ money had been punished.

Non-compliance of federal ministries and departments with financial management has led to issues involving irregular payments, loss of public funds and wastage amounting to RM620.07 million in 2020.

Auditor-General Datuk Nik Azman Nik Abdul Majid said of the RM510.49 million in irregular payments, RM499.19 million involved payments for maintenance service claims without being verified at the National Security Council (NSC) level.

Meanwhile, of the RM104.79 million loss in public funds, RM81.69 million involved unclaimed penalties not imposed by the Immigration Department RM4.79 million involved equipment that was received late and not installed at Istana Budaya.

(Source: Malay Mail)

And there were more:-

Non-compliance with financial management has resulted in issues of irregular payments amounting to RM1.299 billion, loss of public funds of RM11.45 million and a waste of RM8.87 million to the government in 2020.

Auditor-General Datuk Seri Nik Azman Nik Abdul Majid said that last year, the National Audit Department (NAD) had conducted compliance audits on five federal agencies and submitted 19 recommendations for consideration for implementation.

(Source: NST)

The fact that no one gets severe punishment for mishandling taxpayers’ money is one reason why it happens every year. Whilst it is good that it provides an opportunity to improve things with better processes, training and a bit more accountability, punishment must also be given to those who are reckless and don’t follow the processes on purpose.

BN Cabinet Politicians Sabri

How many of these Ministers and Deputy Ministers actually do their job in accordance with the salary paid by the taxpayers? The last major disaster which is the flood in the Klang Valley saw how ineffective some of these politicians were. It is high time to kick some of the inactive politicians out and push for productivity and efficiencies in the public sector. Image source: Twitter

Unnecessary Politician Expenses

One of the areas that leech taxpayers’ money is the politicians’ salaries and allowances and this also covers the unnecessary special appointments that duplicate the functions and the roles of the public servants and diplomats. These appointments are not required and are often made as rewards.

An average of RM48,000 in wage expenses is spent on staff assigned to the offices of each government special envoy, a parliamentary written reply has revealed.

Prime Minister Datuk Seri Ismail Sabri Yaakob gave the latest disclosure in a parliamentary reply yesterday to Johor Baru MP Akmal Nasrullah Mohd Nasir, who asked for the overall cost including remuneration, allowances, office occupancy and staff for the minister-level special envoys between 2020 and 2021.

(Source: The Malay Mail)

And this:-

“Between January 2020 and June 2022, RM923,455.10 was spent on official visits by the four special envoys of the prime minister, while executing their duties and commitments,” Latiff said.

(Source: Free Malaysia Today)

And this:-

In 2020, it was revealed that on average, a Malaysian minister makes an average RM55,650 (US$12573) a month. Their salaries include travel, entertainment, housing, and car allowances. And if you’re a people’s representative, you enjoy additional salary increments.

(Source: Mashable)

And this:-

Ekonomi Rakyat did a comparison and discovered that Malaysian ministers receive a much higher salary as compared to ministers in other countries.

For instance, ministers in Malaysia are provided RM178,000 salary per annum, which is 12.4 times more than the minimum salary set by the government for the people, RM14,400 per annum. Whereas in developed countries like the United Kingdom, ministers only acquire GBP79,754 per annum, which is only 4.6 times higher than the minimum wage of their people, GBP17,077.

On the other hand, our neighbouring country, Indonesia, pays its ministers Rp233,680,000 per annum, five times higher than the minimum salary of the people in Jakarta (Rp50,400,000 per annum). This seems reasonable if you compare it with our country Malaysia.

(Source: World of Buzz)

Imagine the numbers in total each month and then each year and you will have a sizable amount that can be saved from the budget.

Johore State Elections 2022

Since the back door Government took over from Pakatan Harapan Government, there have been 4 state elections with the last 2 state elections being unnecessary as the BN was in control of the state government. Image source: Twitter

Unnecessary State Elections

The Elections Commission is expecting about RM1.1 billion as the cost to run the next general elections and this is almost double the cost of the general elections that were held back in 2018. Elections even at the state level are not cheap as seen in the recent state elections:-

A total RM420 million was spent by the Election Commission for the Johor, Sarawak, Melaka and Sabah elections.

Minister in the Prime Minister’s Department (Parliament and Law) Datuk Seri Wan Junaidi Tuanku Jaafar said from the total, RM130 million and RM149 million were spent to conduct the 16th Sabah and 12th Sarawak elections respectively.

The EC, he said, spent RM45 million to conduct the 15th Melaka polls and RM96 million for the 15th Johor state election which concluded on March 12.

“The costs include expenses to acquire and rent election equipment, vehicles, information and communications technology (OCT) development; logistics, allowances of election staff and others.

(Source: NST)

Whilst elections are part and parcel of the democratic process but triggering elections just because there is a conflict within the same political party or when there is no danger of loss of confidence in the state assembly is wasteful and reckless. This impacts the expenses despites the earlier budgets.

Final Say

It is a matter of simple logic – you cannot spend money that you don’t have in your pockets. You cannot create money from thin air. This is why one needs to prepare and maintain a personal budget so that one can track your expenses and ensure that it is within your income.

However surprisingly the national budget is prepared outside this simple logic and when there is a gap between budget income and expenses happens, the Government needs to revise their budget expenses priority or go into debt to cover the shortfall.

The country needs a more prudent budget approach so that unnecessary expenses are curtailed so that there will be more for high-priority implementations. For that, one needs the right political will and strict enforcement to get this done.

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