Home 2009: 8 Why I can’t support Najib’s Budget

Why I can’t support Najib’s Budget

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Jeyakumar Devaraj explains why he can’t support Najib’s Budget. While the PM’s slogan that the people should come first sounds good, it is not going to happen under an economic strategy that puts the interests of corporations in the forefront. 

Frankly, I am disappointed with the Budget tabled by the Prime Minister on 23 October 2009. Although the Prime Minister declares that he cares for the rakyat and the slogan  “People first” is repeated several times in his presentation, the budget that he has tabled is suffused with many macro-economic policies that are going to cause problems to our people.

Attracting FDI or Direct Foreign Investment to Malaysia has been put forward by the Prime Minister as one of the main drivers of the Malaysian economy. Let’s take a closer look at this policy.

How are we to attract FDI to Malaysia given the intense competition among other countries in the region for FDI? Our government appears to have adopted the following approaches to ensure the profitability of investments made by the foreign investor including the following three:
•    One – a low basic wage
•    Two – measures to weaken unions
•    Three – steps to water down existing legal safeguards for workers.


Mortgaging workers’ rights

The government has allowed the importation of some 3 million migrant workers. They have flooded the labour market, and are a major factor depressing workers’ wages in Malaysia. At present Tan Sri Speaker, the wage for an ordinary factory worker in Sg Siput is about RM450 per month unless the worker puts in overtime.

RM450 a month is not a living wage that can sustain the expenses of a family. It is just pocket money! But this is the wage regime that our government maintains in line with its “business-friendly” stance.

As I mentioned earlier, our government has been dismantling some of the protection that workers in this country used to enjoy. Let me give an example, Mr Speaker. Section 30 of the Industrial Relation Act allowed a worker who could prove to the Industrial Court that he had been unfairly dismissed to claim compensation for the entire period it took to settle his case. In some cases this has taken six years, and workers have been able to claim compensation for the entire period.

However, two years ago, the government amended this section to limit the amount of compensation that can be claimed to only 24 months no matter how long the case takes to be settled. This has reduced the costs for a company that wishes to expunge active union leaders from their work-force and thus has weakened the union movement.

The reluctance of the Human Resources Minister to refer cases to the Industrial Court is another factor that has weakened the labour movement. In Malaysia, workers have to get the permission of the Minister to file their case in the Industrial Court. Over the past one year, the Human Resources Minister has turned down 75 per cent of the applications to file in the Industrial Court.

These are just some of the steps taken by our government to make Malaysia the preferred destination for FDI. But in doing so the government is mortgaging the rights of workers to appease and attract foreign investors.

This is why I am disappointed with the 2010 Budget. The slogan is nice to hear. “People First”! As a socialist I like the slogan. But the walk does not reflect the talk. The walk proposed in the 2010 Budget is going to disadvantage the ordinary people of Malaysia.

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Liberalisation and health care

The other major strategy in the government’s drive to get foreign capital to invest in and stimulate the Malaysian economy is to liberalise the economy.

Tuan Speaker, I agree that liberalisation might grow the Malaysian economy in the short term. But the benefits of this growth will not accrue evenly to all layers of society. The richer groups will tend to benefit while the middle income and the poor families will find their situation even worse because of this liberalisation.

Allow me to take up some specific proposals in the Budget tabled on 23 October to show why I am saying liberalisation will adversely affect the poorer 60 per cent of the Malaysian population.

Let’s take the issue of Health Tourism. It is public knowledge that the quality of care in government hospitals is deteriorating and that the main cause of this is the relative lack of experienced doctors in government service. Despite the fact that about 70 per cent of admissions are to government hospitals, only 30 per cent of all the specialists in Malaysia are in the government sector. This is the main cause of the dropping level of health care.

Health tourism will expand the business of the private hospitals, and this will definitely accelerate the brain drain and exacerbate the shortage of doctors’ problem in the government hospitals. So, whose interests are served by this policy of promoting health tourism, Tuan Speaker – the people’s or the interests of the GLCs now owning the private hospitals?

In his budget speech, the Prime Minister said that the government would reduce in stages its involvement in the economy especially in sectors where it is now competing with the private sector. He added that the government will begin by privatising profitable entities owned by the Finance Ministry.

I wish to draw the attention of the House that the Institut Jantung Negara (IJN) is also a company owned by the Finance Ministry, and it is running well. Although the PM did not specify which entities are on the list for privatisation, we must remember that the IJN was almost privatised to Sime Darby last year – and that too very hurriedly!

Sime Darby owns the most developed cardiology unit in the private sector. If it is able to acquire by far the best cardiology unit in the government sector as well, it would have a virtual monopoly of cardiology services. If this were to happen, whose interests are being served? The people’s? Or those of Sime Darby?

Regressive taxation

The third point that I would like to touch on is changes to the tax regime. In the 2010 Budget Proposal tabled by the PM, the uppermost tax bracket for personal income tax is reduced by 1 per cent to 26 per cent. This may not seem like much, until you take into cognisance the fact that personal and company taxes have been reduced progressively over the past 20 years. In 1988, company tax was 40 per cent of profits. It now stands at 26 per cent.

Tuan Speaker, a government must have its revenue to administer the country and provide services to the public. The issue here is the source of this revenue. Is it coming mainly from the richer individuals and the corporations, or is it going to be squeezed out of ordinary folks?

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The “business friendly” approach that our government has adopted has led to the shifting of the tax burden to the poorer 60 per cent of the population.

In the 2010 Budget Proposal, the PM says that the government is in the final stages of fine-tuning the Goods and Services Tax (GST) prior to its implementation.

Please allow me to read an extract from page 9 of The Star Biznews dated 29 October 2009 which reveals how the corporate sector views this initiative:

“The Goods and Services Tax will stabilise the government’s finances in the long run says Ernest & Young. XX, one of it’s partners suggested that the strategy would be to start low and pull up the rate every few years. As in most countries with the GST in place, a reduction in corporate and personal tax will follow suit he said.”

Whose interests are being advanced, Tuan Speaker? The ordinary rakyat or that of the rich and corporate sector. But the PM’s slogan was catchy, wasn’t it? “People First.”

Liberalisation in developing countries

Tuan Speaker, the experience of other developing countries is that liberalisation of the economy leads to
•    a deterioration in the income and quality of life for the bottom 60 per cent of the population.
•    a deterioration in the Gini Coeffecient.
•    rising costs and shortages in essential items including food.

And in all of this, the poorest 20 per cent suffer the worst deterioration in living standards.

Tuan Speaker, I now wish to refer to the recent experience of India. Please permit me to read a few extracts from an article that was carried in the New Straits Times on 19 October 2009 titled “India Story is back as foreign money pours in” .

“Foreign investors have been racing to put their money in Asia’s third-largest economy drawn by a slew of upbeat economic indicators.

“The benchmark Sensex index is already up nearly 80 per cent so far this year – ranking it among the top 10 performers globally – as foreign investors have pumped in US$13.6 billion into stocks.

“Corporate profits are expected to log an average 23 per cent growth this fiscal year.”

In page 17 of the same paper, and on the same day, there is another article on India titled, “It’s the stick for India as it gets tough on Naxals” which says –

“A fierce battle is raging between the Manmohan Singh government and the votaries of Mao Zedong.

“The Naxals’ rise has been phenomenal in the last five years. Attempts to build roads and set up industries have fuelled resistance. Poor handling has stirred conflicts.

One government estimate suggests the extremists have pockets of influence in 20 states. Extremist violence affects 223 of India’s 625 districts.”

Are these two trends completely unrelated you think? On one side we see corporate profits soaring and FDI funds flooding in, while on the other we witness the armed rebellion of poor farmers and the tribal people under the tutelage of the Naxalites.

I believe that these two trends are causally connected. The marginalisation of poorer sectors by the neoliberal trajectory of growth is, to me, the main cause why the Naxalites have been able to rally so many of India’s poor into an armed insurrection against the State.

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Social justice and public security

We do not have an armed insurrection in Malaysia. But we can already see the symptoms of marginalisation and social exclusion in our society – the Mat Rempit phenomenon as well as the emergence of Indian youth gangs. Our streets are no longer safe, and violent crime rates are soaring!

The 2010 Budget calls for more police personnel and better enforcement. But the truth of the matter is that social justice is the best guarantor of our safety from violence in the streets. If the form of development continues to exclude and marginalise a significant proportion of the poor among us, then the anger will spill out into the streets, and no amount of sloganeering like “People First” will be able to stem that anger.

Having more police to catch the youth and building more jails to hold them is not the way to solve the problem of the rising crime rate. We need to implement a more balanced economic policy – one in which ordinary workers get a decent wage, which enables them to obtain all the basic necessities and services that they and their families need. A just development will build social solidarity, which is a much better preventer of street crime than well-armed policemen!

We have many well read and intelligent economists working in the EPU and the Finance Ministry. I really can’t understand how these intelligent economists can help craft a strategy that will disadvantage a large sector of our population.

To these economists in the EPU and Ministry of Finance, may I suggest that you do some research on the effect of liberalisation on the Gini Coefficient of countries in Africa and South America. Look also into the impact of liberalisation on food security in Haiti, Colombia, Egypt and other countries.

I would also strongly recommend an article by Prof Martin Hart-Landsberg in the September 2009 issue of Monthly Review, which addresses some of the above issues in greater depth. A copy of this magazine can be found in the Parliament Library. Do take a little time to read and digest the analysis.

Tuan Speaker, I agree 100 per cent with the PM’s slogan that the People should come First. But this is not going to happen under an economic strategy that puts the interests of corporations in the forefront.

This is why I am disappointed – only the slogan is acceptable. The policies and approaches contained in the 2010 Budget are going to worsen the economic hardships that the poorer 60 per cent of our population are already facing.

I am sorry, but I cannot support a budget such as this.

Dr Jeyakumar Devaraj, an Aliran member, is the Member of Parliament for Sungai Siput. He made this speech during the debate on the Budget in Parliament.

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